A record number of Australians are falling behind on mortgages, reaching record highs, but experts are not concerned.
APRA data shows that the portion of borrowers who are overdue or impaired on their mortgage has risen from 1.64% in Q4 2024 to 1.68% in Q1 2025. Despite the rise, it still remains well below 2% of the Australian loan book and below the recent high of 1.86% in 2020.
Mortgage arrears include loans 30-89 days overdue and non-performing.
A review of the latest Financial Stability Review from the RBA found that while highly leveraged borrowers and low-income households tend to have higher arrears, even in these categories arrears are relatively low and continue to trend lower.
Mortgage arrears for borrowers with a loan-to-value ratio of 80% or higher peaked at around 2.5% in 2024 but are now falling. In contrast, borrowers with a loan-to-income ratio above four reached roughly 1.5% and have been trending downward.
Cotality estimates that when rates rise, a borrower with a $750,000 mortgage will see their monthly repayments rise by $1,550.
Cotality research director, Tim Lawless, said the lower-than-expected rise in arrears can be attributed to tighter lending buffers, less risky loans being issued and strong employment rates despite higher interest rates and the cost of living.
"Lending standards have been unquestionably strong throughout the recent cycle, with a consistently low portion of mortgage originations considered 'risky'," Lawless said.
