September 24th 2024.
Australian borrowers have been struggling under the weight of their monthly home loan repayments, with billions of dollars being paid out each month. The Reserve Bank Housing Loan has released data showing that in June 2024 alone, mortgage holders were charged a whopping $14.5 billion. Even more staggering is the fact that 66 percent of this amount was just interest charges. This represents a significant increase of $5.5 billion compared to the previous quarter in March 2022, where $9 billion was charged.
As Australians anxiously awaited the Reserve Bank's latest decision on interest rates, it was announced that the rate would remain unchanged. This means that for a whole year, mortgage holders would have paid a steady 4.35 percent. "It's hard to believe that Australian borrowers are being burdened with an extra $5.5 billion each month in mortgage repayments. What's even more remarkable is that most households are managing to make it work," remarked Sally Tindall, Canstar Data Insights Director.
With the RBA opting to maintain the current rate, many borrowers were left disappointed. "While a rate cut would have been music to borrowers' ears, the RBA is unlikely to make any moves in the near future," Tindall added. She explained that the central bank's "wait and see" approach was supported by the current unemployment and inflation rates. The next rate decision is scheduled for early November 2024.
Experts predict that the major banks will eventually follow suit and lower their rates. The forecasts for the big four banks suggest that the Commonwealth Bank will lower its rate to 3.10 percent in December, while Westpac may follow suit in February 2025 with a rate of 3.35 percent. National Australia Bank is expected to lower its rate to 3.10 percent in May 2025, and ANZ may lower its rate to 3.60 percent by February 2025.
For struggling borrowers, even a small rate cut could make a significant difference. Research from Canstar has shown that a 0.25 percent rate cut could provide a monthly relief of $92 for a $600,000 loan and $153 for a $1 million mortgage. However, the $14.5 billion figure highlights the grim reality that many Australian mortgage holders are facing.
In fact, a study by Finder in August revealed that 40 percent of borrowers are currently putting more than 30 percent of their earnings towards home loans. This is well above the widely accepted threshold for mortgage stress, which is considered to be 30 percent. It's clear that many homeowners are reaching their breaking point.
It's important to note that the information provided on this website is general in nature and should not be considered as personal financial advice. It's crucial to take into account your own objectives, financial situation, and needs before making any decisions based on this information.
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