An analyst from Moody’s Investor Service thinks that housing repayment costs have peaked and that affordable homes may soon become the trend in Sydney and Melbourne this year.

“Housing prices fell during the three months to 31 March, 2016, suggesting that repayment costs may have peaked,” said analyst Natsumi Matsuda. “We expect that affordability in these two cities will improve over 2016, reflecting the pullback in the housing market.”

Over the past year, housing affordability has deteriorated in all capital cities except Perth. This means homeowners spend a larger proportion of their income on monthly mortgage repayments. Moody’s research shows that the average Australian household pays an average of 27.6 per cent of their monthly income on mortgage repayments in the year to March 31.

However, conditions started to improve this March quarter as house prices improved in all capital cities, especially Sydney and Melbourne.

Matsuda further said that this week’s official cash rate cut will have a further positive influence on housing affordability, even though some of that could be offset because lower interest rates might put upward pressure on property prices.

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