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Data released by major bank Westpac from the Westpac-DataX Consumer Panel has found that February’s rate cut is already alleviating some pressure, although slightly, saving the average mortgage holder $12 a month, marking the first drop in over three years.
The insights said that average mortgage repayments have surged since 2022, with the average minimum repayments increasing by 42.2 per cent (around $754) over the two years to January 2024. Meanwhile, average wages only grew by 8.5 per cent ($651).
However, repayment increases have since peaked as of February 2025 at 31.3 per cent of income ($2,741), with this share being for higher income groups.
Since the February rate cut of 0.25 bps bringing the cash rate down to 4.1 per cent, average mortgage repayments fell by 0.5 per cent (as of March 2025), equating to around 0.1 per cent of income. This was the first decline in minimum repayments since December 2021.
Coinciding with this data, the latest mortgage stress figures from Roy Morgan have shown that number of borrowers “at risk” of mortgage stress has declined to a two-year low, with this figure expected to drop even further in the seemingly likely event that the Reserve Bank of Australia (RBA) continues to ease monetary policy during the May meeting.
Neha Sharma, Westpac economist, said: “Most cohorts continue to build financial resilience by increasing savings, though for lower-income groups this also includes reducing spend on food and groceries. In contrast, the highest income group is still drawing down on savings to support discretionary spend.”
The insights further showed that spending has lifted slightly during the quarter, up by 0.9 per cent, but remained flat when accounting for inflation. According to Westpac, this suggests households remain cautious despite easing rate pressures.
Additionally, mortgage holders aged between 18 and 24 have the lowest financial buffers, only having seven months of essential savings saved (less than half of the average) and are the most vulnerable to an unexpected loss of income, despite the ability to improve their positions faster than other age groups.
Sharma said: “The saving rate slowed into the new year. While this supports a more positive consumption outlook, buffers remain below previous highs and with global uncertainty elevated and widespread, a shift back to more aggressive saving attitudes cannot be ruled out.”
Indeed, while Australians are still building their savings, the report revealed that lower-income groups have resorted to cutting back on essential items such as food and groceries, suggesting that cost of living remains a critical issue during the quarter.
“Overall, while household financial resilience has weakened since 2022, most households remain well-positioned to meet their essential expenses, including mortgage repayments,” Sharma said.
“Looking ahead, financial resilience should strengthen as real household disposable incomes recover and interest rates decline further. While some deterioration in the labour market is anticipated, mortgage holders have historically weathered periods of rising unemployment relatively well.”
[RELATED: Mortgage stress reaches 2-year low]
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