Mortgage relief is “on the way” for homeowners

Jarrod
By Jarrod
5 Min Read

Experts say Aussie homeowners could finally be in for some much-needed relief following lower-than-expected inflation figures.

In this month’s Finder RBA Cash Rate Survey, 19 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

Almost all experts (89 per cent) believed the Reserve Bank of Australia (RBA) will again hold the cash rate at 4.35 per cent going into February.

Graham Cooke, head of consumer research at Finder, said many Australians were in urgent need of some financial reprieve.

“Homeowners are still reeling from 13 rate hikes in the last 2 years. Our data shows a staggering 40 per cent struggled to pay their mortgage in December,” he said.

“Even though inflation is falling, I expect the RBA will hold the cash rate for most, if not all of 2024.”

While 1 in 3 experts predict a cash rate cut by at least August this year, almost half (40 per cent) don’t expect the RBA to start cutting rates until December 2024 or later.

Peter Boehm from Pathfinder Consulting said inflation was heading in the right direction.

“In Australia I expect there will be little change [to the cash rate] during the first half of the year (subject to any inflation shocks).

“By mid-year we should see rates come down by at least 50 basis points over the second half of 2024, as inflation heads towards the target range,” Boehm said.

Housing Industry Association Chief Economist Tim Reardon said that the “global shocks” that caused the peaks in inflation have since dissipated, paving the road for rate cuts.

“There were long lags in this cycle. Home building is set to slow significantly in 2024, this will flow through to the wider economy,” said Reardon.

Housing costs are still hurting wallets

Finder’s Cost of Living Pressure Gauge – which combines data from Finder’s Consumer Sentiment Tracker (CST) and the Reserve Bank of Australia (RBA) – showed that in December 2023, the cost of living pressure experienced by Australian households sat in the extreme range at 79 per cent – an increase of 1 point from the month before;

Australians are saying their bank balances are lower by $3,000 compared to the previous month, with 56 per cent of homeowners saying housing costs are causing extreme financial stress. 

Across the country, credit card spending is also at a record high of $34.6 billion, with 78 per cent of Australians saying they feel extremely or somewhat stressed about their finances. 

But there is hope in sight. The majority of experts who weighed in (71 per cent) expect the cost of living crisis to ease eventually in 2024.

“While the gauge remains in the extreme range, it’s likely that this will be where the cost of living pressure peaks,” said Cooke.

“We expect to see some relief on the horizon, and with a little luck the pressure will reduce slowly over many months.”

Australians taking action

At the current rate, homeowners with a $500,000 mortgage are paying an extra $1,210 a month since the cycle of hikes began almost two years ago.

This pressure has reportedly forced 2 in 5 Aussies – equivalent to 7.5 million people – to do what they can to cut spending across the board.

Finder’s survey of 1,063 respondents uncovered the drastic measures some households are taking to overcome affordability difficulties.

The research found 3 per cent of Aussies have resorted to paying for their mortgage on credit cards, while 4 per cent have taken out a personal loan to deal with rising housing costs.

Renting out a spare room (5 per cent) and moving in with a friend to share a mortgage (4 per cent) were other common strategies.

Cooke said rising costs had been relentless, with everything from rent to insurance to electricity going up in 2023.

“The threat to livelihoods is significant, and many people are having to make some tough calls to get by.

“As we wait for interest rates to drop – people are taking matters into their own hands.

“If you haven’t reviewed your financial arrangements in the past 12 months, you could probably be getting a better deal,” Cooke said.

The next interest rate decision will be handed down on February 6.

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Jarrod
By Jarrod
Jarrod Brown combines his background in journalism, copywriting and digital marketing with a lifelong passion for storytelling. He has a strong passion for new and emerging consumer technology within the building sector. He lives on the Sunshine Coast - usually found glued to the deck of a surfboard.