Inflation data for August, released on Wednesday, saw annual consumer prices rise by 5.2 per cent, up from 4.9 per cent in the 12 months to July.
But annual core inflation, which strips out holiday travel and volatile items like fuel, fruit and vegetables, came in at 5.5 per cent, down from 5.8 per cent in July.
It's that falling core inflation figure that has economists broadly expecting the RBA will leave the cash rate on hold at its meeting next Tuesday, but another rate hike is possible in the coming months.
"Anyone with a mortgage should plan for at least one more rate rise, because if inflation doesn't behave, we could end up with another hike before Christmas," said RateCity.com.au research director Sally Tindall.
The RBA has repeatedly said future increases to the cash rate may be needed to control inflation, and that looming threat will impact more than half a million mortgage holders who are rapidly approaching the mortgage cliff, according to RateCity.com.au analysis of data from the RBA and the big four banks.
The mortgage cliff refers to the expiration of thousands of ultra-cheap, fixed rate home loans that were signed during the pandemic, when the RBA reduced the cash rate to the low level of 0.1 per cent.
RateCity.com.au estimates around 155,000 mortgage holders will reach the cliff by the end of the year, with another 450,000 fixed loan mortgages to expire in 2024.
To date, RateCity.com.au said more than 1.3 million fixed rate mortgages have expired, with 590,000 expiring in 2022 and around 725,000 estimated to have expired so far this year — meaning Australia had passed the "halfway point" of the mortgage cliff.
"Prior to COVID, the proportion of people fixing [their home loans] was around 13 per cent," said RateCity.com.au's research director Sally Tindall.
"At the peak, it was 46 per cent, but when the rate hikes kicked in [from May 2022] it was back down to 12 per cent and dropped as low as 4 per cent, according to ABS data."
Eliza Owen, the head of research for property data and analytics firm CoreLogic, said despite the "slight uptick" in the monthly inflation indicator for August, it was "temporary, and inflation is continuing to unwind."
"What this means for the fixed-rate cliff in the short term is the monthly [inflation] figures suggest rising cost-of-living pressures, and it may be harder for people to cover their housing costs due to increased food and fuel prices," she said.
"The good news is that the inflation figures were probably not significant enough to prompt another rise from the RBA anytime soon.
"From an interest rate perspective, we're getting closer to a downward trend in mortgage rates."
But separate data released by CoreLogic shows there have been increasing signs of mortgage stress across the housing market that's experiencing a higher interest rate environment.
Last week, CoreLogic data found there were a growing number of properties being sold at a loss, the portion of loss-making short-term resales rising to 9.7 per cent in the June quarter — up from 2.7 per cent a year earlier.
The resale data also showed that the portion of short-term resales sold within two years of being purchased had risen slightly to 8.5 per cent, with CoreLogic suggesting more sellers were willing to incur a loss that could be partly due to higher interest rates.
Additional research released by CoreLogic on Wednesday showed that short-term selling reached a record high in August, with 16 per cent of all listings for properties that were owned for less than three years.
"Short-term resales can occur for many reasons, including people 'flipping' homes, making large capital gains, or moving for work," Ms Owen said.
"But in an environment where interest rates have risen rapidly and cost-of-living pressures are high, resales due to mortgage serviceability constraints may also be a contributor.
"The accelerated rise of short-held listings (where the previous sale date was in the past three years), is distinctly noticeable from May 2022, when the underlying cash rate started to move higher from record lows."
Ms Owen said the rate of late mortgage payments had also started to rise, but was still at a "very low" level.
"The overall portion of mortgage payments that were coming in late has gone from a recent low of 1 per cent of outstanding housing credit in the September quarter of 2022, it's risen to 1.3 per cent for the June quarter of 2023," she said.
"That's still a very low figure, it's below what we saw at the height of the pandemic, where 1.9 per cent of housing credit was in arrears.
"So it's rising, but it's still low."
Although the expiration of thousands of fixed rate loans had prompted fears of a wave of mortgage defaults, Ms Tindall said that had so far not occurred "for a range of reasons".
"People coming off fixed rates have used the opportunity to refinance or at the very least haggle with their bank for a better rate," she said.
"A lot of Australians have decent buffers to fall back on. For many families, COVID was an opportunity to bunker down and make extra repayments as a result of low-cost lockdown living.
"Others will have benefited from a decent pay rise or have a relatively small loan … while some have been saving up for when they come off [their fixed rate loan]."
Ms Tindall said some mortgage holders have asked to be placed onto a hardship policy with their bank, and some are planning to sell, or have sold already.
"Unfortunately, some borrowers may still come unstuck, even if there isn't another rate hike to come. In tough financial times, borrowers often put a priority on paying off the mortgage, but there could be bills piling up in the background," she said.
"This can be like a ticking time bomb that detonates after a few more tough months.
"For many families, things could get tougher before they get better, even without another cash rate hike, which the RBA has not ruled out."
Even with the risk of a future interest rate increase from the RBA, Ms Tindall said some borrowers are still not feeling the full impact of past hikes.
"The two-to-three-month lag on when the RBA increases the cash rate to when borrowers see that extra money coming out of their bank accounts means many households with a variable mortgage only just started paying for the last rate hike back issued in June in August or September," she said.
Should the RBA increase the cash rate again by the end of the year to 4.35 per cent, Ms Tindall said the average borrower with a $500,000 loan at the start of the rate rises last May could pay $1,210 more a month on their mortgage.
"While inflation is coming down, the cost of living is by no means in reverse," she said.
"Filling up the shopping trolley and car each week is still going to be a challenge for the foreseeable future."
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