Rate cuts help with mortgage stress

According to the Housing Industry Association (HIA), mortgage stress is easing in direct correlation to the RBA's rate cuts.

The industry group reported that the number of Australians experiencing mortgage stress has dropped from 31% in August 2008 to 21% in December 2008.

The RBA has been cutting rates since September, slashing the official interest rate by 300 basis points and effectively undoing 12 rate rises that have occurred between 2002 and 2008. Its actions have saved some 350,000 households from mortgage stress - which occurs when a household spends 30% of more of its income on mortgage repayments.

Borrowers with an average $250,000 standard variable mortgage were now saving $450 a month in loan repayments.

Brisbane borrowers experienced the biggest drop in mortgage stress levels. The proportion of Brisbane borrowers feeling mortgage stress dropped from 32.7% in August 2008 to 13.4% in December 2008. However, Sydney borrowers are still doing it tough with an estimated 28.5% continuing to feel the pinch.