Here's exactly how much the average mortgage holder needs to save to keep afloat
The Reserve Bank's first rate cut in nearly five years may have come as a welcome relief to millions of mortgage holders, but it could be a small comfort to those doing it tough.
RBA cut the cash rate by 25 basis points, bringing it down to 4.10 per cent which will slash the average home loan by around $103 if banks and lenders pass on the decrease.
However, according to research collected by Finder, mortgage holders with an average home loan of $641,416 will still be forking out $3,784 every month.
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However, according to research collected by Finder, mortgage holders with an average home loan of $641,416 will still be forking out $3,784 every month. AAP
And those with a loan size of $1 million will claw back $154 every month.
Around 35 per cent of borrowers struggled to pay their mortgage in February – meaning 1.2 million homeowners are at financial breaking point, Finder's Consumer Sentiment Tracker found.
The research found over a third (37 per cent) of borrowers will need to save an additional $500 on their monthly repayments to keep their heads above water.
Another 14 per cent need $1000 slashed from their mortgage repayments to get out of financial stress.
This ideal figure may be out of reach based on ANZ economists' forecast of only two more rate cuts this year, which would bring the cash rate down to 3.85 per cent.
Major banks including NAB have passed on the rate cut to customers. Getty
"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," said Finder head of consumer research Graham Cooke.
"While this rate drop provides some relief, many households will still need to make tough financial decisions to stay afloat."
As of today, 28 banks and lenders – including Westpac, ANZ, Commonwealth Bank and NAB – have announced plans to pass on the full 0.25 per cent cut to customers.
However, Canstar warned customers that a lower repayment could mean paying thousands more in the lifetime of a home loan.
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Another 14 per cent need $1000 slashed from their mortgage repayment. Pictured: RBA governor Michele Bullock. 9News
Canstar research found a borrower with an average $600,000 debt with 25 years remaining could save $89,143 if they keep the same repayments, providing the RBA makes the standard four cash rate cuts.
"While many people will use this relief to help balance the household budget, those who are in a position to keep their repayments at today's level could benefit in the long run," said Canstar data insights director Sally Tindall.
"If you can grit your teeth and tip any savings into your home loan, you'll thank yourself down the track."
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