Australia's top financial watchdogs caution that mortgage arrears are rising amid decade-high interest rates.

Financial hardship applications are also up but from a low base. Most borrowers are still meeting repayments, though inflation and interest rate pressures persist.

The Council of Financial Regulators, comprising the Reserve Bank, the Australian Securities & Investments Commission, the Australian Prudential Regulation Authority, and Treasury, notes risks in commercial real estate lending but sees them contained due to conservative practices.

The CFR remains vigilant about potential risks, committing to ongoing industry engagement and monitoring.