Mortgage Affordability is the topic of conversation
“Higher loan amounts, coupled with subdued wages growth, has resulted in a higher proportion of buyer incomes needed for loan repayments,” Dr Wilson (Bluestone Economist) said.
“Strict lending conditions from financial institutions however place a ceiling on borrowing capacity that can sideline buyers and result in reduced demand and lower prices growth.”
All states had reported declines in home loan affordability over April, with the exception of the ACT, where the index had a marginal fall of 0.5 per cent.
Rising affordability barriers and increases in the cost of living – are sidelining buyer capacity and activity as mortgage holders will cop higher repayments.
All eyes will be on the winter selling season as, for the first time, home loan affordability data will reflect the increases in official interest rates in May and June – the first rises in over 11 years with more set to follow as the RBA [Reserve Bank of Australia] struggles to control high inflation.
The RBA has indicated the interest rate increases that took place over May and June are the first of more to come, as it grapples to get a grip on inflation. An example of the changes in affordability with the latest increase in living expenses below.
| Household | Income | Current HEM | New HEM | Variance |
| Single | $60,000 | $306,900 | $306,000 | -$900 |
| Couple | $80,000 | $265,700 | $260,400 | -$5,300 |
However, it is not all doom and gloom – “The Economist” has issued a somewhat optimistic outlook for housing, expecting higher rates to be offset by record-low unemployment, rising wages, record-level savings, the wealth effect from the recent housing boom and the 3 percentage point serviceability buffer rate banks need to use, to test borrowers’ debt repayment abilities.
There are also new scheme placements coming on board in the new tax year – to further assist first home buyers into the housing market. An increase in placements from 10000 to 35000 in the Home Guarantee Scheme – if you want to know more contact Donna-lee to find out more about the options available.
Warm regards,