expect more... 1800 111 455

Australia’s Mortgages – More Affordable Now Compared to 30 Years Ago

By May 1, 2018 Blog No Comments

It might surprise you to learn that Australia’s mortgages are more affordable now as compared to mortgage affordability in 1990. This data comes from a current analysis by the Property Investment Professionals of Australia, or PIPA. However, there are still some who will argue that there is an absence of affordable property.

Peter Koulizos, PIPA chairman, says, “Many commentators use just two indicators to measure housing affordability – income and house prices.” While he believes these two indicators are good measures for predicting housing costs, it is imperative to include mortgage repayments when analysing mortgage affordability.

PIPA uses an analytical method that considers the average size of a home loan, the principal and interest on the payments, the standard variable rate, and the yearly average wage from 1990 to the present.

Income & Repayments

The PIPA analysis reports that in 2018, a person requires 40 per cent of the average salary to make their home loan repayments. 48 per cent of the average yearly salary was needed in 1990 to make mortgage payments.

“Home loans are as affordable now as they were in 2010 and actually more affordable than 28 years ago,” claims Koulizos. He noticed how interest rates play a primary regarding affordability along with the present low rate climate, which is keeping property prices within accessible reach for Australians.

Introductory Deposit Challenge

In 1995, home loan interest rates were at 17 per cent, the average income earner would have spent 35 per cent of their income to repay their mortgage. Mr. Koulizos associates the affordability improvement between 1990 and 1995 to the substantially lower interest rates offered in 1995. He discovered that a majority of promising first-time home buyers appear stumped by the introductory deposit.

The PIPA chairman acknowledges that saving for the initial deposit can be challenging. He is aware that most first-time buyers try unique strategies like “reinvesting and buying in more affordable locations, as well as buying with family and friends to get a foot on the real estate ladder”.

Koulizos recommends that buyers need to be sure they rely on qualified, professional property investment experts for reliable and viable advice in an effort to get the best finance options available to them. He says, “Shop around and use a reputable mortgage broker and professional property investment advisor.”

Common sense dictates that you carefully choose a mortgage professional before you buy or invest in property in Australia. It is the only way to feel confident that you are getting the most from your investment and securing your financial future.

First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370