The Australian dream of owning a home drifts further out of reach as mortgage affordability drops close to its lowest point, a new study has shown.
The June quarter 2007 edition of the Deposit Power/REIA Home Loan Affordability Report revealed that home loan affordability declined by 4.2% from the previous quarter and deteriorated by a hefty 8.3% over the past 12 months.
This means that Australian households are now using more than a third (36.2%) of their income on paying off their mortgages.
REIA President Graham Joyce blamed rising interest rates for the worsening housing crisis and predicts the worst is yet to come. "Following the August 2007 interest rate rise, more pain is set to come for homebuyers."
NSW regained its position as the least affordable location where borrowers needed 38.5% of their household income on servicing an average loan.
Queenslanders spent 37%, Victorian families used 34.5% and Western Australians needed 34.9% of their household income on meeting their home loan repayments.
Higher income levels in the ACT and NT cushioned the blow with borrowers only needing 20.6% and 22.3% of their family income on paying off their home loans.
Luke Sheales, national sales and distribution manager with Mortgage House, urged homeowners to continually assess their current home loans in light of the deteriorating affordability levels.
"Your mortgage is the biggest debt you've got; you should assess it regularly to make sure it's working for you. If you don't review it regularly, it's costing you money. If you're really tight with your finances, you should consider fixing, so you get a guarantee that your home loan repayments will remain constant," said Sheales.
You can compare your existing loans with other products in the market at www.yourmortgage.com.au. There is also a handy calculator to help you determine monthly, weekly and fortnightly repayments.
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