2 July 2026
KPMG Australia analysis of ABS data on home loans, personal loans and credit cards interest payments over the past 40 years reveals households are now facing one of the heaviest interest burdens on record.
Over the past two years, households have tougher conditions than they did when the RBA cash rate reached 17.5 percent in 1989.
The KPMG analysis looked at interest payment to income as an average across all households, not just those with home loans. The ratio reflects, interest payments and not principal repayments.
After hitting a historical low of 2.6 percent in the March quarter 2022, interest payments on debt peaked at 5.9 percent of household income in the December quarter of 2023 and averaged 5.8 percent between September 2023 and March 2025. This coincided with the RBA increasing the cash rate from 0.1 percent to 4.35 percent.
During the 1989-90 inflation spike, interest payments only peaked at 5.7 percent of household income in the March quarter of 1990 and averaged 5.6 percent between September 1989 and June 1990.
“The 17-18 percent interest rate period of the late 80s and early 90s is often cited as the historical peak for home loan stress, but the data shows that borrowers have actually faced tougher conditions over the past few years,” said KPMG Senior Economist Terry Rawnsley.
However, the toughest burden on households has largely been carried by Gen X around the time of the GFC when interest as a share of income peaked at 7.9 percent in June 2008 when the cash rate was 7.25 percent.
For almost a decade between September 2005 and March 2013, interest repayments averaged 6.6 percent of household income.
“What set the GFC apart was that central banks effectively lost control of interest rates. As the global system seized up, rates stayed higher for longer,” Rawnsley said.
“By contrast, other peaks have largely been driven by the RBA deliberately tapping the brakes, lifting rates briefly to cool inflation. “
“In today’s economy higher house prices has led to bigger loans, leaving household budget’s susceptible to even the most modest of interest rate rises.”
Victorian households have the highest interest burden
Victorian households pay the highest interest repayments as a share of household income in the country at 6.9 percent.
Terry Rawnsley explains that improved affordability over the past five years has actually driven the higher burden for Victorians.
“First home buyers typically have larger mortgages and higher debt burdens relative to their incomes. Victoria’s more affordable homes have lifted homeownership and subsequently pushed the average interest repayments up to 6.9 percent, well above other states.”
“Victorians higher debt burden is actually a symptom of homeownership success, but it does mean the pain of interest rate rises will hit households harder than other states.”
South Australia (5.7 percent), New South Wales (5.6 percent), Queensland (5.5 percent) and Western Australia (5.3 percent) are all below the national average of 5.8 percent.
ACT, Tasmania, and the Northern Territory have interest repayments of less than 5 percent reflect lower home prices, but also lower home ownership rates.
Comparing 2024-25 to the historical lowest in 2021-22, Victoria saw the largest increase (3.8 percentage points), followed by New South Wales and South Australia (3.0 percentage points).
Debt burden looks set to rise again
In total in the March quarter 2026 Australian households paid $33.6 billion in interest on dwellings ($31 billion) and consumer debt ($0.26 billion) loans. This is the fourth highest on record, with the highest being in March 2025 ($34.3 billion).
Although interest rate cuts through 2025 provided some relief, three interest rate increases in 2026 have since pushed the repayment burden back up to 5.4 percent in March 2026, up from 5.2 percent in the previous quarter.
“Another interest rate rise will see interest repayments head towards 6 percent of household income,” Rawnsley said.
“Paying off a home loan has traditionally been a source of financial security. But increasingly, it is becoming a source of financial anxiety as repayment pressures rise again.”
Data Sources
Analysis is based on:
- Australian National Accounts: National Income, Expenditure and Product, March 2026
- Australian National Accounts: State Accounts, 2024-25 financial year
There may slight differences between the totals from each data set due to revisions by the ABS.
Technical note
Dwelling interest includes owner occupier, investor and holiday home loans.
The ABS National Accounts only collects data in interest payments and not principal repayments. Interest repayments relate only to interest on loans, not principal payments.
This is because interest repayments represent an economic transaction between households and financial entities, whereas principal repayments are a transfer of funds.
The interest payment to income ratio is an average across all households, not just those with home loans. The ratio reflects the number of households with loans, the size of those loans, and the interest rate.
The analysis shows that in the late 1980s, when lending structures were more complex and often involved secondary finance, the burden of repayments surged as the Reserve Bank cash rate climbed to 17 percent in 1989. By March 1990, interest payments peaked at 5.7 percent of household income.
The data also highlights the importance of non-bank finance during this period. In March 1990, 2.7 percent of household income was spent on consumer debt interest, while 3.4 percent went towards dwelling loans. Following banking deregulation, the need for these 'top-up' loans declined, and by 1993, consumer interest had fallen to around 1 percent of household income, today it is around 0.4 percent.
For further information
Samantha Bailey
Senior Media Relations Manager
KPMG Australia
0422 082 893
sbailey8@kpmg.com.au