1.2 million borrowers still at risk of mortgage stress, as RBA holds rate

7NEWS

4 days ago

As Australians recover from the Reserve Bank's shock decision to hold the cash rate this week, a new survey has found recent rate cuts have provided some relief for mortgage holders, with the proportion of households under mortgage stress decreasing in recent months.
The survey of 1000 people by comparison company Finder revealed the number of borrowers who spend more than 30 per cent of their after-tax income on mortgage repayments has fallen from nearly 50 per cent in February to just over one-third.
The definition of mortgage stress is when a large portion of your income - typically 30 per cent - is spent on your mortgage, leaving little for everyday expenses and unexpected costs.
The latest analysis by Finder revealed 37 per cent of homeowners are spending more than 30 per cent of their household income on mortgage payments, compared to 47 per cent in February.
That's 1.2 million borrowers who are still at risk of mortgage stress - down from 1.55 million earlier this year.
Finder's most recent analysis showing almost one in five (19 per cent) spend more than 40 per cent of their household income on mortgage repayments.
Even more startling is that seven per cent of borrowers are spending more than half of their income on home repayments.
Meanwhile, Finder's Consumer Sentiment Tracker reveals 13 per cent of households have missed at least one mortgage repayment in the past six months.
Despite the shocking statistics, Finder home loans expert Richard Whitten, says mortgage holders are under significantly less financial strain since the rate cuts in February and May.
"The loan to income ratio is improving with thousands of homeowners getting relief when they need it most," Whitten said.
"This shift marks a turning point - for the first time in years, many households are finally able to breathe financially," he added.
The survey found two thirds of borrowers (63 per cent) are now spending less than 30 per cent of their income on mortgage payments, compared to 53 per cent in February.
While the average Australian mortgage holder spends 28 per cent of their after-tax income on their mortgage - just below the recommended threshold of 30 per cent.
However, Whitten was quick to add that many households will be relying on further rate cuts to ease financial pressure.
"Low mortgage stress doesn't mean everyone is suddenly flush with cash," he said.
"While the two rate drops so far in 2025 have provided some relief month to month, many families are still living pay cheque to pay cheque.
"The fact that over a million borrowers are still stretched shows we're not out of the woods - but the worst may be behind us," he said.
Whitten encouraged borrowers to explore refinancing as lenders drop their rates.
"Refinancing to a cheaper loan could put hundreds of dollars back in homeowners' pockets each month - a simple move that can ease pressure and keep repayments on track," he said.