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Following the central bank’s first cash rate cut in over four years, an industry expert has warned that the cut might not be enough to ease mortgage holders’ affordability challenges.
One-third of mortgage holders struggled to pay their mortgage in February, adding up to 1.2 million home owners who are straining to meet monthly home loan repayments, new data from Finder revealed.
Finder’s latest Consumer Sentiment Tracker further revealed that many home owners previously failed to meet these repayments entirely, with 11 per cent of borrowers stating that they had missed a mortgage repayment in the past six months.
The findings follow the Reserve Bank of Australia’s decision to cut the cash rate by 25 basis points, bringing it down from a 13-year high of 4.35 per cent to 4.10 per cent.
Finder said that the rate cut was desperately anticipated by borrowers, with data from October 2024 showing that one in seven (14 per cent) home owners admitted they would lose grip on their mortgage by February if rates didn’t begin to fall.
For banks and lenders that pass the rate cut in full, the monthly repayment on an average home loan of $641,416 will drop by $103, from $3,887 per month to $3,784.
Despite having more savings, Finder highlighted that 37 per cent of borrowers will need their monthly repayments to drop by $500 or more to be financially comfortable.
Finder data showed that a further 14 per cent of mortgage holders will require their monthly repayment to decrease by $1,000 or more a month to get out of financial stress.
Finder’s head of consumer research, Graham Cooke, said the data showed that “many mortgage holders are still in a very difficult position”.
“While this rate drop provides some relief, many households will still need to make tough financial decisions to stay afloat,” Cooke said.
Australia’s financial sector has widely heeded the cash rate cut, with 28 lenders, including all four major banks, confirming that the full 25 basis points cut will be passed on to customers and come into effect anywhere between 18 February and 10 March.
Despite the rate cut being “a lifeline for millions of Australians teetering on the edge of mortgage default”, Cooke warned that “for some, it may be too little, too late”.
“With millions of home owners struggling to meet their repayments, the pressure on household budgets has reached a breaking point,” he concluded.
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