Aussie dad reveals insane amount of salary going towards his mortgage: 'Hard to survive'

An Aussie worker has revealed how much of his salary goes towards his home loan thanks to successive interest rate rises and cost-of-living pressures. Michael Williams is one of many who have been struggling to keep up with their repayments due to recent economic factors.

He told Yahoo Finance he funnels between 60 to 70 per cent of his salary straight into the mortgage he took out on his Melbourne home for his family every pay cycle. The digital marketer said his home loan was only $1,800 per month during COVID, but that has now shot up to $3,100.

Williams explained that after all the other fees are paid, it leaves very little money left over to enjoy life.

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"We have to pay the body corporate as well, plus the council fees and insurance, all sorts of things on top," he told Yahoo Finance.

He is the sole income earner in his family as his wife gave birth last year, but the Victorian resident said even when she comes off maternity leave, they will still be spending about 40 to 50 per cent of their combined income on the mortgage.

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The digital marketer said he has taken one week off work and he's never been able to afford a meal out since his daughter was born.

"I'm on paycheque to paycheque at the moment," he said.

"On top of that, the baby's expenses, stroller, this and that.

"It's very hard to survive, to be honest. I don't know how many Australians are facing a similar kind of situation."

Mortgage stress widespread across Australia

Mortgage stress kicks in when a homeowner is spending more than 30 per cent of their wage on their repayments, but as costs rise everywhere in the country, the number of Aussies above this threshold is staggering.

A poll of more than 5,700 Yahoo Finance readers revealed that more than two-thirds of respondents (70 per cent) were allocating 35 per cent or more of their wages to their mortgage.

A little more than half were in the 40 per cent of their salary and above category.

So it's no surprise that many are desperate for the Reserve Bank of Australia (RBA) to cut interest rates after keeping them on hold at 4.35 per cent since November last year.

Mortgage repayments have jumped by about $1,562 per month on a $600,000 loan since the central bank started hiking rates in May 2022.

But one interest rate cut would do little to ease the pressure of those undergoing severe mortgage stress.

“Borrowers who maxed out their borrowing to the highest affordable level just before the Reserve Bank started lifting the cash rate will now be in a seriously stressed position,” Canstar finance expert Steve Mickenbecker said.

“Lenders' loan assessments allow for an interest rate 3 per cent higher than the actual lending rate to allow for higher future interest rates.

“That’s usually conservative but when rates rise by 4.25 per cent in 18 months, way more than the lift in incomes, stressed borrowers are in uncharted treacherous waters.”

RBA called on to cut rates to spare more stress

The RBA said it will only start considering cutting rates when inflation reaches the 2 to 3 per cent target range.

When that magic number will be reached is up for debate as inflation remains "sticky". The central bank just pushed back its forecast to mid-2026.

That means homeowners like Williams will need to hold on until then.

"They keep holding the rate to control inflation, but they have to think about the other part of things as well," Williams told Yahoo Finance.

"Everything has gone up at the moment. So not only on the mortgage part but your daily household items as well."

RBA Governor Michele Bullock said she understood the toll tight monetary policy had on Australians, citing letters she has been sent by under-pressure borrowers after the central bank's August meeting.

“I do find it difficult to read some of them," she said.

“But it's not just interest rates hurting those people, it's the cost of living."

“It's the fact that inflation has been so high now for a few years… and they don't want to see the prices of their essentials going up at the rate they are.

“Getting inflation down is really the key to this ultimately being resolved, so that households can just get on with their lives.”

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