A generous round of interest rate cuts from the Reserve Bank of Australia (RBA) since September has saved 350,000 households from mortgage stress, the nation’s peak home building group says.

The Housing Industry Association says 584,354 Australian households with a standard variable home loan, were in mortgage stress in December compared with 934,502 in August before the rate cuts.

In that time, mortgage stress rates have dropped to 21.1 per cent, from 31.8 per cent.

Brisbane had the biggest drop in mortgage stress levels, while Sydney borrowers continued to feel the most pain.

Mortgage stress occurs when a household spends more than 30 per cent of its pre-tax income on mortgage repayments.

The RBA has slashed official interest rates by 300 basis points since September, reversing the 12 rate rises between mid-2002 and early 2008.

The latest cut, a 100 basis point drop this month, took the overnight cash rate to a six and half year low of 4.25 per cent and reduced standard variable mortgage rates offered by the major banks to 6.74 per cent .

HIA economist Ben Phillips said home borrowers with an average $250,000 standard variable mortgage were now saving $450 a month in loan repayments thanks to the four successive rate cuts this year.

“With an additional $450 a month in the kitty, they can pay off their mortgage more quickly or they can spend it on the essentials of life,” he said.

“As we all know, prices still remain very high for many, and what they’re saving, it’s handy each month.”

The HIA calculated that Sydney still had Australia’s highest mortgage stress rate, even after the rate cuts, with 28.5 per cent in stress in December compared with 41.8 per cent in August.

Just three months ago, 236,149 Sydney home borrowers were in mortgage stress, but that number dropped to 161,161 per cent this month.

Brisbane had the most dramatic reduction in mortgage stress, with the proportion of afflicted borrowers dropping to 13.4 per cent in December, from 32.7 per cent in August, a 19.3 percentage point fall.

The city also had the lowest mortgage stress rate of any state capital, lower than Adelaide (18.5 per cent), Melbourne (20.3 per cent) and Perth (22.1 per cent).

The Northern Territory continued to have Australia’s lowest mortgage stress rate, with 10.6 per cent of home borrowers in stress in, down from 18.5 per cent in August.

AAP