According to S&P Global Ratings, falling interest rates and stable inflation are expected to help reduce mortgage arrears in Australia and maintain them at historically low levels.
S&P’s latest RMBS Performance Watch reports that while arrears rose slightly in the first quarter of 2025—largely due to seasonal spending over the holidays—the broader trend remains resilient. Prime residential mortgage-backed securities (RMBS) arrears stood at 0.97%, while non-conforming arrears reached 4.39%.
“While cost-of-living pressures may persist, low unemployment and falling interest rates will help keep mortgage arrears low,” said Erin Kitson, analyst at S&P Global Ratings.
Australia’s predominantly variable-rate mortgage market means that modest rate reductions can offer meaningful relief for many borrowers. S&P forecasts the cash rate to fall to 3.60% by year-end.
Cautious household spending, driven by global uncertainty, is also expected to contribute to arrears stability, as more borrowers prioritise mortgage repayments over discretionary spending.
In addition, the current rate environment is expected to revive refinancing activity, with increased competition among lenders offering new opportunities for borrowers.
As we monitor the shifting landscape, staying informed is key.
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