Rate rises, slow wage growth causes decline in housing affordability

By |
The out-of-cycle interest rate hikes levied by Australian lenders during November led to deterioration of housing affordability across a number of real estate markets according to one lobby group.

According to the Housing Industry Association’s (HIA) Housing Affordability Report for the December 2015 quarter, the interest rate rises levied as a result of stricter capital requirements for lenders saw housing affordability in Australia fall 6.4% over the three month period.

“The unilateral increase in the major banks’ variable mortgage rates which came despite the absence of any change in the official cash rate has delivered a significant blow to housing affordability,” HIA chief economist Shane Garrett said.  

“Combined with double-digit dwelling price growth in cities like Sydney and Melbourne, the shock jump in interest rates has pushed home affordability to its least favourable position in over three years,” Garrett said.  

Canberra’s real estate market was the worst hit by the rate rise, with affordability declining 11.4% during the quarter.

Affordability worsened 10.5% in Melbourne and 3.3% in Sydney.

Darwin was the only market to see an increase in affordability over the quarter.

Garrett said the impact on affordability the November rate rises had was worsened due to current levels of wage growth in Australia.

“The affordability challenge has been compounded by the slow pace of earnings growth which means that the buying power of households has not kept pace with dwelling prices,” he said.

“The increase in mortgage interest rates during November was an unpleasant surprise for homeowners, and housing affordability will be damaged even further if this tactic is repeated.”

Source: HIA

Garrett also renewed calls for policy makers to address affordability issues by making changes to stamp duty arrangements.

“HIA research has shown how the typical stamp duty bill of around $20,000 eventually costs homebuyers about $50,000 over the course of the mortgage due to higher LMI premiums and mortgage interest costs. It’s time for this inefficient tax to be addressed.”

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Top Suburbs : wiley park , revesby hts , belmont , midland , coburg north

go back

Get help with your investment property

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here