The Reserve Bank's deputy governor is confident that most mortgage borrowers can cope with rapidly rising interest rates, even as analysts suggest many households could soon face $1,000 a month or more in extra repayments.

RBA deputy governor Michele Bullock said Australian households were generally in a good position to weather coming interest rate increases.

She said the rate increases would be unlikely to increase financial stability risks arising from the household sector.

However, despite her sanguine views about rising rates, she said extremely low interest rates throughout the pandemic had encouraged many people to take up fixed-rate home loans, with the share of housing credit on fixed-rate mortgages jumping from 20 to almost 40 per cent.

And the bulk of those fixed rates would be expiring next year, leaving millions of households rolling over onto much higher variable rates, she acknowledged.

What will happen when fixed rates roll over?

Speaking in Brisbane, Ms Bullock said the RBA board would be keenly watching how households responded to rate increases this year.

She said households with fixed-rate mortgages had been shielded from interest rate increases so far.

However, the majority of those fixed-rate loans are due to expire over the next two years, with the greatest concentration of loans expiring in the second half of 2023.

"What is the potential impact though when they do roll off?" she asked.

She said assuming variable mortgage rates were going to rise by 3 percentage points by mid-2023, so those households rolling onto variable rates would face much higher mortgage costs next year.

"Assuming all fixed-rate loans roll onto variable mortgage rates and new variable rates are broadly informed by current market pricing, estimates suggest that around half of fixed-rate loans [by number] would face an increase in repayments of at least 40 per cent," she said.

"This is slightly more than the rise in payments that variable-rate borrowers would experience over this time."

Brace for four more super-sized rate hikes, warns ANZ

Ahead of Ms Bullock's  assessment of how households would cope with rising rates, ANZ's economics team significantly revised its cash rate forecast on Tuesday morning, predicting there will now be four interest rate increases over the next four months, worth 0.5 percentage points each.

That would take the RBA's cash rate target from 1.35 per cent, where it sits currently, to 3.35 per cent by November.

David Plank, the head of Australian economics at ANZ, said the labour market was becoming so tight that it was contributing to inflation risks.

"Our longstanding forecast has been for the unemployment rate to drop to 3.3 per cent in the later part of 2022," he said.

"The risks to this forecast look to be weighted to the downside, even with somewhat faster rate hikes than previously.

However, Mr Plank, too, is relatively relaxed about the effect rising mortgage repayments will have, given so few Australians are out of work.

"The faster move to a restrictive rate setting will bring forward the point at which the economy slows below trend," he argued.

"It also suggests house prices will fall by more than the 15 per cent, or so, we currently anticipate to the end of 2023.

"But it doesn't necessarily mean a hard landing for the economy. A cash rate of 3.35 per cent implies that household interest payments as a percentage of household income peak below the level reached in 2008."

What about monthly mortgage repayments?

RateCity.com.au research director, Sally Tindall, said that, if the cash rate hit 3.35 per cent by November, as forecast by ANZ, someone with a $500,000 mortgage would see their monthly repayments rise by $909 in the space of just seven months, since the RBA began moving in May.

For someone with a $1 million mortgage, monthly repayments would rise by $1,818.

"Many families are already under the pump with skyrocketing grocery and petrol costs. Hefty increases to mortgage repayments, on top of this, could tip some into the red."

Who holds the debt?

However, Ms Bullock also said it was important to know who was holding the debt, because not all borrowers were alike.

She said the majority of housing debt was attached to households that had the income to service it.

"If we look at the households that have debt, almost three-quarters of debt outstanding is held by households in the top 40 per cent of the income distribution," she said.

"Indebted households in the bottom 20 per cent of the income distribution hold less than 5 per cent of the debt.

"Furthermore, households with high debt-to-income ratios [DTIs] who might be most affected by a rise in interest rates also tend to be high-income households.

She said that suggested a large number of households were likely to be able to handle "somewhat higher" interest rates.

What about falling house prices?

Ms Bullock also addressed concerns about falling house prices.

She said that, if house prices fell by 20 per cent, the share of loan balances that would find themselves in negative equity would increase from 0.1 per cent to 2.5 per cent — it was 2.25 per cent prior to the pandemic.

"Negative equity" is a situation in which the value of your property falls below the amount of money you still owe on your mortgage.

"Scenario analysis based on loan-level data suggests that a decline in housing prices of 10 per cent would raise the share of balances in negative equity to 0.4 per cent, which is still much lower than its peak of 3.25 per cent in 2019," she said.

"Even a fall of 20 per cent in housing prices would only increase the share of balances in negative equity to 2.5 per cent.

"This low incidence of negative equity reduces the likelihood that borrowers will enter into default, as well as the size of losses incurred by lenders if they did."