Average Mortgage Holder’s Survival Savings Needed

If you’ve been sweating over your mortgage payments, the Reserve Bank’s first rate cut in nearly five years might have felt like a breath of fresh air. But for many homeowners, it’s more of a small sigh than a big relief.

The RBA has dropped the cash rate by 25 basis points, bringing it down to 4.10%. If banks pass on the full cut, the average mortgage holder could see their repayments shrink by about $103 a month. If you’ve got a $1 million loan, you’ll save roughly $154.

Sounds great, right? Well, not so fast.

Many Homeowners Still Struggling

According to Finder, if you have an average home loan of $641,416, you’re still looking at $3,784 in monthly repayments. That’s a huge chunk of change, especially when 1.2 million homeowners are already on the brink of financial stress.

The data shows that 37% of mortgage holders need to save at least $500 a month just to keep their heads above water. Another 14% need at least $1,000 shaved off their mortgage repayments to avoid drowning in debt.

Will More Rate Cuts Help?

ANZ economists are predicting just two more rate cuts this year, which would bring the cash rate down to 3.85%. But for some homeowners, that won’t be enough.

“This rate cut is a lifeline for millions of Australians teetering on the edge of mortgage default, but for some, it may be too little, too late,” says Finder’s head of consumer research, Graham Cooke.

To Save or Spend?

So far, 28 banks and lenders, including Westpac, ANZ, Commonwealth Bank, and NAB, have committed to passing on the full cut. But here’s something to consider—lower repayments now might actually cost you more in the long run.

Canstar research found that if a borrower with a $600,000 mortgage keeps their repayments the same, they could save $89,143 in interest over 25 years (assuming the RBA continues with standard rate cuts).

Sally Tindall, Canstar’s data insights director, has some advice:“If you can grit your teeth and tip any savings into your home loan, you’ll thank yourself down the track.”

So, what’s your move? Will you enjoy the short-term relief, or play the long game and chip away at your loan faster?