Why Australia’s CPI Ignores Mortgage Stress in 2026
Why Mortgage Repayments Don’t Show Up in Inflation Data
In Australia’s CPI (Consumer Price Index), home loan repayments have been excluded since 1997. That change came after the Reserve Bank of Australia requested the ABS to shift to an “acquisitions” model – treating buying a home as an investment, not current spending. In practice, this means rising mortgage rates don’t push up official inflation the way other costs do. Yet for homeowners, the effect is very real: mortgage interest still accounts for about 15% of a typical household's cost-of-living basket. In other words, owner-occupier households feel higher repayments even if headline inflation eases.
Rate Rises Squeeze Borrowers First
By contrast, when the RBA lifts rates, mortgage holders feel the pinch immediately. Banks pass on rate hikes by increasing minimum home loan repayments. For example, on a $600,000 mortgage a 0.25% rise adds roughly $90 per month. That extra cost can quickly overwhelm tight budgets. Recent data show about 24.5% (≈1.19 million) Australian home borrowers are already at risk of mortgage stress, and a single rate hike could tip another ~41,000 into difficulty. In short, borrowers’ reality – rising monthly bills – can diverge sharply from the picture painted by CPI. Official inflation might even fall while many households struggle with higher loan payments.
Image: A calculator, model houses and keys symbolize how mortgage costs, savings and borrowing power intersect. Mortgage holders feel policy changes first. As the RBA raises rates to fight inflation, borrowers’ cashflow is squeezed. Banks don’t ignore this: they stress-test loans on actual repayment amounts, not just official inflation rates. Borrowers with tight loan structures or no cash buffers are most at risk during hikes. We’re already seeing pressure in the market, with calls to financial helplines up ~10% year-on-year due to housing stress.
Why Mortgage Advice Matters Now
Even though repayments aren’t counted in CPI, lenders still look at your full loan servicing costs and income when you apply. That means a sudden $90 jump on your mortgage is very much front-of-mind for banks and borrowers alike. A well-structured loan – for example with an offset account, redraw facility or tailored split between fixed and variable rates – can absorb shocks better than a vanilla product. This is where brokers add real value. We stress-test your budget under higher rates (not just rely on headlines), help build buffers and flexibility into your loan, and review your options proactively. Annual loan “health checks” ensure your home loan still fits your life and market conditions.
In short, good advice helps ensure you can handle repayments even as costs rise.
How Ask Financials Can Help
At Ask Financials, we work with you to navigate these challenges. Ready to make your move? For tailored advice or to discuss your buying strategy, contact Ask Financials. Our brokers speak your language, not jargon. Feel free to call us on 0433 944 055 or book a free consultation today. Follow us on Instagram and LinkedIn for more tips. Ask Financials is here to help you secure the right loan and property – with confidence, even in a changing market.
