The total has increased significantly over the past two and a half years
Australian mortgage borrowers are paying approximately $14.5 billion per month on home loan repayments, with many awaiting potential interest rate cuts.
Canstar’s analysis of data from the Reserve Bank of Australia (RBA) shows that borrowers were charged this amount in June, with 66% of repayments attributed to interest charges.
This marks a significant increase from March 2022, when $9 billion was charged, representing a $5.5 billion rise in monthly repayments.
Despite ongoing cost pressures, the RBA held the official cash rate steady at 4.35% for the seventh consecutive meeting on Tuesday. The rate has remained unchanged for a full year, with the next board meeting scheduled on November 4 to 5, 2024.
The market remains divided on when rate relief will occur. The Commonwealth Bank of Australia (CBA) recently revised its forecast, predicting a rate cut later this year, while other major banks like Westpac, NAB, and ANZ anticipate cuts in early 2025.
CBA predicts the first cut in December 2024, with five cuts in total, lowering the rate to 3.10%. Westpac expects the first cut in February 2025, with four cuts reducing the rate to 3.35%. NAB forecasts a first cut in May 2025, or possibly earlier in February, with five cuts in total bringing the rate to 3.10%. ANZ predicts a February 2025 cut but warns of potential delays, with three cuts lowering the rate to 3.60%.
Canstar suggests that a single rate cut could provide some relief to borrowers. For a $600,000 loan, a rate cut could reduce monthly repayments by $92, while borrowers with a $1 million loan could save up to $153. With multiple cuts, monthly repayments could drop by $441 for a $600,000 loan and by $736 for a $1 million loan.
“Cash rate cuts will be music to borrowers’ ears, but the RBA is unlikely to move any time soon,” said Sally Tindall (pictured above), data insights director at Canstar. “Underlying inflation is tracking in the right direction, but the reality is it’s still sitting firmly in the threes. With unemployment holding steady at 4.2%, the RBA has cover to continue its ‘wait-and-see’ strategy to get the job done, and properly.”
However, borrowers looking to alleviate financial pressure do not necessarily have to wait for official rate cuts, she added. According to Canstar’s research, refinancing a $600,000 loan to a lower variable rate of 5.75% could save borrowers up to $499 per month. Tindall advised that borrowers should consider renegotiating with their lenders or refinancing to benefit from current market rates.
“There are 36 lenders on the Canstar database offering at least one variable rate under 6%,” she said. “While there’s no big four bank on this list, when you add up the savings you could make, it might not matter as much as you once thought it did.”
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