For a change, there’s some good news for Australian mortgage holders. The latest data shows household cash flow pressures are easing as inflation cools and interest rates start to come down. In fact, real incomes are inching up and many homeowners have kept adding to their savings buffers (like offset and redraw accounts) during the past year. As mortgage brokers, we love to see clients building these safety nets – it’s a big reason most families have been able to weather the rate rises.
Crucially, only about 2% of variable-rate borrowers are in a cash flow shortfall (where income isn’t covering essentials plus mortgage payments). That’s a tiny share of borrowers, and it’s even lower than the peak last year, thanks to easing inflation and recent tax cuts. In other words, the vast majority of Aussie borrowers are keeping up with their loans without severe stress. Loan arrears (overdue payments) are also low – they’ve stabilised around pre-pandemic levels. A key reason is the strong job market: with unemployment near record lows, most people have been able to stay employed, pick up extra hours, or secure wage rises to help pay the bills. Homeowners have also benefited from rising property values (house prices are up ~10% since early 2022), which boosts equity and gives anyone struggling more options to avoid default (for example, selling the property if necessary). Overall, households have shown remarkable resilience, and as brokers, we’re seeing most clients adapt well to the high-rate environment.
Remaining Risk Pockets (High LVRs & DTIs)
Not everything is smooth sailing. We are keeping a close eye on high-LVR and high-DTI loans, meaning those who borrowed a very large percentage of the property value or a high multiple of their income. These highly leveraged borrowers are more prone to fall behind if something changes with their income, expenses or rates. In fact, arrears rates for highly leveraged and lower-income households are still a bit higher than for other borrowers. As a mortgage broker, it’s part of our job to help clients manage these risks – for example, by encouraging extra repayments or planning for an interest rate buffer if you stretched your borrowing capacity to begin with.
Outlook: Easing Pressures and Investor Comeback
Looking ahead, the outlook is upbeat for most borrowers. Economic forecasts suggest household budget pressures will ease further over the next year. Real wages are expected to rise (outpacing inflation), and if interest rates continue to fall as predicted, mortgage payments will take up less of people’s incomes. The RBA even projects the share of borrowers in negative cash flow could drop back to just above pre-pandemic levelsrba.gov.au. We’re already seeing many clients use this breathing room to increase their prepayment buffers or build equity – a smart move while times are good.
Another trend to be ready for: property investors are likely to return to the market as borrowing becomes cheaper. Investor loan growth has already been picking up and is now above its long-run average. History shows that when rates drop, investors seize the opportunity. Add to this the fact that Australia still has a housing supply shortage, and it’s a recipe for stronger competition in the property market. As The Guardian noted recently, expectations of rate cuts, a growing investor presence, and the ongoing lack of homes for sale are putting sellers back in control.
Pro tip: We help our clients get all these ducks in a row so they can move fast when opportunity knocks.
Your Next Smart Move Starts with the Right Financial Strategy
Remember, the current improvements are there to be leveraged wisely. Use this period to set yourself up – whether that means renegotiating your loan, paying down debt faster, or planning that next property move carefully with expert advice.Ready to get started? At BeSmart Finance, we help both first-home buyers and experienced investors navigate these changes. You can also call us on 0408 659 819 or book a free 30-minute consultation and let’s plan your next steps toward smart.
