Income needed for repayments has declined over the last decade

The proportion of income home loan borrowers have to set aside for repayments has declined over the last decade, according to new figures released last Friday by the Australian Bureau of Statistics (ABS).

“In 2005-06, owners with a mortgage paid 19 per cent of their total household income on housing costs. By 2015-16 this had fallen to 16 per cent,” said Dean Adams, Director of Household Characteristics and Social Reporting. “This is likely driven by lower interest rates coupled with growth in household incomes over the last decade.”

The average mortgaged household now spends less of its income on housing than it does on food, a major turnaround from earlier surveys. (Housing costs include mortgage repayments, as well as water and rate payments.)

Adjusted for inflation, the average mortgaged household paid $434 per week in 2015-16, which hasn’t changed that much from 2005-06. Over the same period, the average income of mortgaged households grew from $2,272 per week to $2,759.

According to Adams, mortgage and property values have increased over the last decade. Ten years ago, the real median dwelling value was $449,000. This has since climbed to $520,000.

The burden imposed on mortgaged households might actually be lower than the survey suggested. “Our survey measures what they chose to pay in mortgage costs, not what they had to pay. As rates have come down, some will have spent more than they need to in order to get ahead on their loans,” Adams said.  

Canberra is the easiest city to shoulder a mortgage in, with monthly payments of 15% of income. Darwin is the most expensive, with monthly payments of 18%. Both Sydney and Hobart have monthly payments of 17%, while Melbourne, Brisbane, Adelaide, and Perth have monthly payments of 16%.

The latest data makes it clear that low-income households were feeling greater mortgage stress. The poorest households are now spending 28% of their income on housing, compared to 23% a decade ago.