Homeowners struggle as rate relief remains elusive

RBA holds rates steady as homeowners brace for another tough Christmas – Money.com.au

Homeowners struggle as rate relief remains elusive

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By Mina Martin

Australian homeowners are preparing for their second consecutive Christmas without relief from high interest rates.

The Reserve Bank (RBA) has kept the cash rate steady at 4.35% since November, leaving households grappling with increased mortgage repayments amid rising living costs.

Mansour Soltani (pictured above left), mortgage expert at Money.com.au, highlighted the strain.

“Homeowners are really feeling the pressure,” Soltani said. “This will be the second Christmas they’ll spend without any rate relief, and it’s coming at a time when budgets are already stretched thin by rising living costs.”

Rising repayments amplify stress

Since RBA began its rate hike cycle in May 2022, the average variable interest rate for new owner-occupier home loans has surged from 2.61% to 6.27%. This equates to a 54% increase in repayments, adding $1,297 per month to a $600,000 mortgage — an additional $15,564 annually.

According to a Money.com.au survey, 86% of homeowners identify their mortgage as their most stressful debt.

Hope for rate cuts in 2025

While relief is expected in 2025, the timing remains uncertain. Soltani predicts that housing costs will be a key issue in the upcoming federal election.

“Relief is coming, but timing will be key — especially with the federal election in May or before. Voters will likely have housing costs front of mind,” he said.

Inflation within target, but challenges remain

The consumer price index (CPI) showed headline inflation has fallen to 2.8%, its lowest since 2021 and within the RBA’s target range of 2%–3%.

However, Peter Drennan (pictured above right), research and data expert at Money.com.au, noted that RBA is more focused on Trimmed Mean Inflation, which excludes short-term price fluctuations.

“The RBA will watch trimmed mean Inflation closely before deciding on rate cuts,” Drennan said. “January 2025’s quarterly inflation data will provide better clarity on whether relief will come in early or late 2025.”

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