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Homebuyers in Australia are facing the worst affordability conditions in at least three decades.

This was according to the latest PropTrack Housing Affordability Index, which showed that the sharp rise in mortgage rates and increasing home prices have worsen the housing affordability.

Overall, households earning the median income can only afford 13% of homes sold in the past year, the smallest level since records began in 1995.

New South Wales, Tasmania, and Victoria had the toughest affordability conditions among all states.

In New South Wales, for instance, a typical-income households can afford only 7% of the homes sold in the state over the past year.

Low- and middle-income households are grappling with severely stretched affordability, with households earning $64,000 annually able to afford only 3% of available homes.

Affordability has diminished across all household types, with a particularly acute impact on 25–34-year-olds who can now only afford less than 30% of available homes.

Meanwhile, challenge of housing accessibility, measured by the time required for new buyers to save a deposit, has grown significantly more difficult due to rapid home price increases.

The average household would need to save 20% of their income for more than five and a half years to save a 20% deposit on a median priced home.

Of all states, Queensland and Western Australia remain the most affordable, which may continue to drive demand for homes.

The PropTrack Housing Affordability Index also showed that servicing a mortgage is currently nearly as challenging as it was in 1989, just slightly below the peak.

In fact, an average-income household would need to allocate one-third of their earnings to cover mortgage payments for a median-priced home.

PropTrack senior economist Angus Moore said the overall situation is especially challenging for lower-income households and first-homebuyers.

“Mortgage interest rates have increased extremely rapidly from the record lows in 2020 and 2021, following RBA rate hikes that began in May 2022,” he said.

Mr Moore said this has caused the sharpest increase in mortgage rates since the mid-1980s and has reduced borrowing capacities by as much as 30% for new borrowers.

“At the same time, existing borrowers, which make up around a third of Australian households, have faced sharp increases in mortgage repayments. A typical recent borrower now faces repayments as much as 50% higher than in early 2022,” he said.

Home prices continued to rise in August, even showing reacceleration after growth slowed down in the preceding months. Mr Moore said there are now far fewer homes for which mortgage repayments are affordable than was the case over the past few years.

“Household incomes have risen since the pandemic and improved labour market conditions have drawn more people into employment and boosted wages growth,” he said.

“However, this has been insufficient to offset higher home prices and, critically, the surge in mortgage rates.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
Featured Online ExclusiveUp to $4k cashback
  • Immediate cashback upon settlement
  • $2000 for loans up to $700,000
  • $4000 for loans over $700,000
6.15% p.a.
6.15% p.a.
$2,437
Principal & Interest
Variable
$0
$0
90%
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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