Strain on Aussie Borrowers: A Deeper Dive

1

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The FSR highlights how these households are making significant sacrifices and adaptations to keep up with mortgage payments. “Besides scaling back their expenditure to mainly essential items and opting for lower-quality goods and services, these families have had to employ other challenging strategies,” the report outlines.

The strategies mentioned include:

• Tapping into their savings.
• Selling off assets.
• Increasing their work hours.

Unsurprisingly, those in the lower-income bracket are disproportionately represented in these scenarios.

The RBA further notes that around one-in-50 borrowers are at a critical risk of default, grappling with both cash flow shortages and minimal financial buffers. Such findings underscore the fiscal tightrope many Australians are walking.

Interestingly, the FSR points out that the pandemic-induced period of low interest rates saw a surge in savings buffers, but these have since receded to pre-pandemic levels for the majority of borrowers. “The proportion of variable-rate owner-occupier borrowers consistently drawing from their offset and redraw balances is now higher than it was prior to the pandemic,” the FSR mentions.

On a brighter note, the RBA anticipates a reprieve for households in the second half of 2024, mainly due to the Stage 3 tax cuts scheduled to come into effect. This relief is expected to be further bolstered by potential reductions in the official cash rate. “If budget pressures indeed alleviate as predicted, the percentage of borrowers facing cash flow issues is projected to dip by a few points by 2026,” the FSR projects.

However, these assumptions hinge on the prevailing employment scenario. An unexpectedly high uptick in unemployment could exacerbate financial stress among debt-laden borrowers. The FSR points out, “Individuals who face job loss or a reduction in hours typically encounter significant income drops, increasing their risk of falling behind on loans.”

On a reassuring note, the RBA mentions that even with a 2% rise in the unemployment rate, few borrowers are deemed to be at imminent risk of default.

This analysis underscores the delicate balance between employment, interest rates, and household financial stability in Australia-elements that will be closely monitored in the coming years.

Published:Thursday, 3rd Oct 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

Affordable Electric Vehicle Loans Now Available for Eligible Australians

27 Dec 2025: Paige Estritori

In a significant move to promote sustainable transportation, the Australian government has introduced a new loan scheme offering low-interest financing for electric vehicles (EVs). This initiative targets Australians earning less than $100,000 annually, as well as essential workers such as police officers, teachers, firefighters, and nurses, regardless of their income level. - read more

Rising Car Repossessions Highlight Financial Challenges for Australians

27 Dec 2025: Paige Estritori

Recent data indicates a sharp increase in car repossessions across Australia, signaling escalating financial distress among households. Automotive auction house Pickles has reported a 13% rise in repossessed vehicles over the past six months, with an 11% increase in the last quarter alone. - read more

December Sees Decline in Used Car Sales and Values, Reports AADA

19 Dec 2025: Paige Estritori

The Australian Automotive Dealer Association (AADA) has released its December 2025 Automotive Insight Report (AIR), revealing a notable downturn in the used car market. After a period of oversupply, the market experienced a 3.8% reduction in listings, bringing the total to 322,532 vehicles. Despite this decrease in supply, sales figures declined more sharply by 8.1%, totaling 181,724 units for the month. - read more

RBA Maintains Cash Rate at 3.60%, Hints at Future Increases

11 Dec 2025: Paige Estritori

The Reserve Bank of Australia (RBA) has decided to keep the cash rate steady at 3.60% during its final policy meeting of 2025. This decision comes amid rising inflation, which reached 3.8% in October, surpassing the RBA's target range of 2-3%. The central bank has indicated that if inflationary pressures persist, future rate hikes may be necessary. - read more

ASIC's Review Highlights Concerns in Car Finance Practices

11 Dec 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has conducted a comprehensive review of the motor vehicle finance sector, uncovering significant issues that raise concerns about responsible lending practices. The findings indicate that some consumers are being subjected to exorbitant fees and are defaulting on their loans shortly after approval. - read more

Click for more Finance News