Households are carrying one of the heaviest interest burdens on record while incomes sit a decade behind. If getting ahead feels out of reach this year, the data says the season changed, not you.
There is a conversation we keep having with clients. A household doing most things right. Stable jobs, a sensible loan, spending under control. And still, at the end of the month, there is nothing left over. The question underneath is almost always the same: what are we doing wrong?
In most cases, nothing. The numbers now back that up.
New analysis from KPMG's Terry Rawnsley shows Australian households are carrying one of the heaviest interest burdens on record. Interest payments as a share of household income reached 5.9 per cent in 2023. That is higher than the 5.7 per cent peak in 1989, when the cash rate hit 17.5 per cent. The June quarter of 2026 sits at 5.4 per cent and is still climbing.
The rate is not the story. The loan size is. As Rawnsley puts it, a $100,000 mortgage at 17 per cent costs about the same interest as a $400,000 mortgage at 5 per cent. The average owner-occupier loan in Australia is now around $735,000, and the average repayment is around $4,300 a month.
Income has not kept pace. Per Capita's Lost Decade research found real wages grew 0.2 per cent a year between 2012 and 2022, leaving the average income about $12,000 a year below where the long-run trend would have put it. Renters are wearing the same squeeze from the other side. Cotality data shows rents rose 43.9 per cent over the five years to September 2025 while wages rose 17.5 per cent, and the typical renting household now commits a record third of its gross income to rent.
Put it together: repayments are historically heavy, incomes are historically behind, and housing costs more whether you own or rent. If it feels hard, that is because it is.
We often talk with clients about seasons. In a growth season, income is rising, the buffer is building and the next purchase is in view. In a maintenance season, the goal is different. The goal is to hold.
For a lot of households right now, the season is maintenance. The mortgage is high. Daycare or school fees are high. The grocery bill is high. Income has not caught up with any of it. Getting ahead may not be realistic this year, and treating that as a personal failure misreads the environment.
This is also where the cash cushion earns its keep. If you spent the low-rate years building an offset balance and you are drawing on it now, that is not going backwards. That is the buffer doing the exact job you built it for.
The same picture shows up across our recent client conversations. Offset accounts are doing the heavy lifting as the household safety valve. Restructures are happening purely for monthly breathing room. Purchases are being timed around school fees and parental leave. Budgets are being reset when borrowing capacity comes back lower than hoped.
The counter-theme matters too. Households with buffers in place are still moving confidently on long-term homes. The pressure has not stopped people. It has changed how they structure.
Deliberately little. Check your rate is still competitive, because lenders reserve their sharpest pricing for the people who ask. Check your structure matches your season: money you may need should sit in an offset, not locked behind a redraw request. Our Offset vs Redraw calculator shows the difference for your numbers.
Extending your loan term is another lever, though not a free one. A longer term does not reduce what the bank charges you, and run to full term it increases it. What it does is lower the minimum repayment. If you keep paying at your old level anyway, the difference lands in your offset instead of the loan. Same money out the door each month, more of it sitting where you can reach it if the season demands.
What that looks like in dollars. Take a household with the average $735,000 loan at 6.14 per cent and 25 years left to run. The repayment is about $4,799 a month. Extend the term back out to 30 years and the minimum drops to about $4,473. That is $326 a month of breathing room.
Run to full term at the new minimum, the extension costs about $171,000 in extra interest. That is the trap. Hold your repayment at $4,799 instead, with the spare $326 landing in the offset, and the picture changes. The offset grows by around $4,000 in the first year and nearly $13,000 over three, because every dollar in it cancels interest at the loan rate. The loan pays down on much the same schedule, and the cushion is there if you need it. If you never do, it clears the loan early.
The numbers are illustrative, and whether it suits you depends on your loan and your lender. That is the structure check.
Keep the buffer for what it is for, and let it run down on essentials without guilt. And stop measuring a maintenance season with growth-season metrics.
Seasons change. Daycare fees end. Wages are starting to move in real terms again. Rates will not sit here forever. The work now is to hold your position well enough that you can act when the next season arrives.
If this is your season, the useful exercise is a structure check, not a self-audit. We are happy to run one with you.
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