home loan affordability

Home loan affordability best in 35 years

We all know that mortgage interest rates are currently at record low levels. However, with property prices holding up remarkably well despite the challenges of the various lockdowns, some people may be confused as to whether the average homeowner is still paying less on their home loan once the increased size of the loan is taken into account.

The good news is that recent analysis by AMP Capital has shed some timely light on this topic, and the results may surprise many people.

It turns out that at the end of December 2020, the amount of interest being paid by the average Australian household had dropped to just 5.5 percent of the average household disposable income. This figure compares more than favourably with the amount being paid as recently as mid-2019, (almost 9 percent), and the 13 percent that we were paying back in 2008. In fact, household interest payments are now at their lowest percentage of disposable income since the mid-1980’s!

Many economists have been surprised at how quickly the Australian economy has rebounded from the impact of last year’s short-lived recession. However, the chief economist at AMP Capital, Shane Oliver, has pointed out that the fall in interest payments is adding around $9 billion to the household economy each quarter when compared with just two years ago.

Of course, one of the measures that Banks introduced at the start of the pandemic was to allow borrowers to defer their home loan repayments from March 202. However, the Reserve Bank recently said that the percentage of mortgage holders who had taken up the repayment deferral offer had fallen from 8 percent in June to just 2 percent at the end of December.

The important thing to remember if the improved affordability of home loans has got you thinking of making a move is that there is no substitute for experienced and objective advice when buying or selling real estate. For real peace of mind, you can call the team at Ian Reid Buyer and Vendor Advocates on 9430 0000. You can also gain real insights into the property market by reading our booklet “Fatal Real Estate Traps Exposed”. It’s available free here on our website, so be sure to get a copy while you’re here.