RBA rate cuts unlikely to ease Aussie mortgage stress

Rate cuts too little, too late, bRight Agent says

RBA rate cuts unlikely to ease Aussie mortgage stress

News

By Mina Martin

Aaron and Angelina Scott (pictured above), co-founders of the Australian proptech firm bRight Agent, have voiced concerns over the effectiveness of potential interest rate cuts by the Reserve Bank (RBA) in providing relief for homeowners.

Even with a potential rate cut in February, the Scotts predicted that the cut will fall short of significantly easing the financial burdens faced by many Australians. They highlighted the minimal impact such cuts have on mortgage repayments.

“On a $1.4 million loan, a 6.75% loan rate dropping to 6.5% will only save the mortgage holder around $107 per fortnight,” the Scotts said. “That’s not likely to be enough to give most mortgage holders a meaningful reprieve.”

The reality of mortgage stress

Research by Roy Morgan revealed that approximately 30% of Australian mortgage holders, which equates to about 1.5 million families, are currently experiencing mortgage stress. This stress is exacerbated by rising living costs, including essentials like fuel and groceries.

“Although the RBA’s interest rate hikes didn’t curb property prices as expected, they have been successful in stripping money out of savings accounts through higher mortgage repayments,” the Scotts said.

Outlook for property investment

The challenging economic conditions are not only affecting homeowners but are also casting a shadow over property investment prospects.

The Scotts warned against assuming the property market will maintain its recent performance, citing softening market conditions and recent declines in home values across major cities like Melbourne, Sydney, and Canberra.

“It’s dangerous to think that just because property has been hot over the past year and a half, it will continue to be so,” they said.

High costs in real estate transactions

For property sellers, high real estate fees exacerbate financial pressures.

The Scotts advocate for the use of tools such as the bRight Agent App, which helps sellers compare agents and secure more favourable commission rates, potentially saving thousands.

Typical Commission Rates

Cost on $1 Million Sale Price

New Indicative Rate with bRight Agent

New Indicative Cost

Indicative Saving

Sydney Metro

$25,000

2%

$20,000

$5,000

Melbourne Metro

$22,000

1.75%

$17,500

$4,500

Brisbane Metro

$25,000

2%

$20,000

$5,000

 

“Using a service like bRight Agent empowers sellers to make savvy decisions and save money without sacrificing service quality,” they said.

Navigating a tough financial landscape

The Scotts said that a mere reduction in interest rates by RBA will not resolve the ongoing mortgage stress crisis nor secure the property investment landscape in 2025.

Read the bRight Agent insights here.

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