Good news for homeowners: The latest figures show a drop in mortgage stress, thanks to the stage three tax cuts.

Nearly a third of Australian mortgage-holders (29.8%), or around 1.6 million Australian home owners, were at risk of their home loans causing them financial strain in July, according to Roy Morgan research.

That marks a 0.5% month-on-month drop.

The dip coincides with the introduction of the stage three tax cuts, which have seen the typical working Australian taking home a larger pay-packet and thanks to a lesser income tax burden.

"The latest figures show that when considering mortgage stress, it is important to appreciate that interest rates are only one of the variables that determines whether a mortgage holder is considered 'at risk'," Roy Morgan CEO Michele Levine said.

"The Stage 3 income tax cuts are delivering significant financial relief, and a boost to take home pay, for millions of Australian taxpayers - including many mortgage holders."

See also: Tax cuts could add $47k to your home-buying budget

And things are expected to have gotten better for embattled mortgage holders in recent weeks, with the research house forecasting 14,000 fewer homeowners were at risk of mortgage stress in August.

The stage three tax cuts came into effect in early July, notably scrapping the 37-cent tax bracket in favour of a 30-cent tax bracket encompassing earnings from $45,000 to $135,000.

That sees a person earning $100,000 before tax paying around $2,000 less income tax this financial year than they did last financial year, likely helping to ease the strain on indebted homeowners.

However, that could change slightly if the Reserve Bank of Australia (RBA) board hikes the cash rate at its two day meeting set to start on 23 September.

Roy Morgan notes there's potential that sticky inflation could drive the RBA board to increase the cash rate, thereby leading lenders to increase interest rates, next month.

New data released on Wednesday morning shows the monthly inflation indicator rose 3.5% over the 12 months to July – slightly higher than many economists were predicting and 50 basis points above the RBA's target range. 

"Even if the RBA increases interest rates in late September, the level of mortgage stress by October will increase only marginally to 1,619,000 [homeowners] - up 15,000 from the current level - and equivalent to 30.1% of mortgage holders," Ms Levine said.

If the RBA were to hike the cash rate hike by 25 basis points, and lenders were to pass the increase on in full, it could drive the typical variable rate on a new home loan from where it sits right now (6.30% p.a. as per RBA data) to 6.55% p.a.

Here's how such a hike could impact monthly home loan repayments:

Figures calculated using Your Mortgage's home loan repayment calculator

While the RBA board has refused to "rule anything in or out" in its recent deliberations, governor Michele Bullock has stated it's not expecting to cut rates before 2025.

Few forecasters currently suggest a rate hike could be on the cards, with economists at the big four banks predicting the first cash rate cut will come sometime between November 2024 and May 2025.

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