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The New Year is upon us, but the news hasn’t improved for those concerned with increasing mortgage repayments or those looking to purchase their first home.
New data released this week shows that the average Australian’s income cannot afford the mortgage repayments on the mortgage of the average property price in Australia. The reason for this is due to the “really high interest rate environment,” said Mark Bouris.
Speaking to Sky News, he explained: “Even though you’re buying a house for a lesser amount of money than the average property, the calculations as to how much it’s going to cost you per month – given the really high retail interest rate environment which we currently live in – is that that affordability becomes almost impossible.”
According to recent analysis by Canstar, the median house price in Australia is currently over $769,000. To comfortably afford the mortgage repayments, a borrower would need to earn over $126,000 a year.
With the average Australian earning approximately $92,000, “the average income is not sufficient, given the interest rate environment which is going to continue on. Generally, Aussie incomes are simply not high enough to pay off that average mortgage”, says Bouris.
This is compounded in some of the capital cities, particularly in Sydney, where even two average incomes are not enough to generate borrowing power to cover monthly repayments on the average $1.2 million house – even though prices have fallen by over 10 per cent over the last year. In Melbourne, a gross annual income of $149,100 is required for the median house price of $915,005.
Bouris added, “In other words, those people don’t qualify anymore to borrow that money; but even if they did qualify, they’re basically spending every last dollar on their mortgage payments, which then sends them back into the rental market: one of the reasons the Sydney and Melbourne rental markets have continued to go up.”