Families face a record mortgage burden as larger loans and higher rates significantly deepen affordability pressures.
Australian families now need 50.9 per cent of their income to meet monthly mortgage repayments, according to real estate group PRD’s latest Australian Economic and Property Report.
PRD described the reading as a peak and well above the 30 per cent mortgage-stress threshold, identified by the Australian Bureau of Statistics (ABS) in 2022.
The report linked a 3.3 per cent deterioration in affordability since the June quarter of 2025 to four cash rate increases this year and a 7.8 per cent annual rise in average loan sizes.
Affordability weakened in Western Australia, Queensland, South Australia, the Northern Territory, and the ACT; however, PRD identified a more favourable opening for prospective buyers in the nation’s two largest states.
“Housing affordability improved in NSW and Victoria, due to a softening in median house prices. This is an opportunity for first home buyers,” the report said.
The findings come after REA Group’s Housing Affordability Index found that a household earning the median income of around $125,000 could afford only 12 per cent of homes sold during FY2025–26.
That record low eclipsed the previous trough of 14 per cent in FY2007–08.
First home buyers shoulder larger debts
The report further noted that first home buyers (FHB) took on 10 per cent more debt over the year to the June quarter of 2026, with Queensland, Western Australia, and the Northern Territory leading the increase.
PRD also highlighted a shift in borrowing profiles, reporting a sharp increase in buyers borrowing at a 90 per cent loan-to-value ratio.
“The number of first home buyers on a 90 per cent loan-to-value ratio has spiked significantly since December quarter 2025,” the report said.
South Australia recorded the strongest annual increase in FHB activity, at 22.9 per cent, followed by Tasmania at 9.3 per cent and NSW at 1.7 per cent.
The report separately outlined that home loan commitments had increased 11.3 per cent annually overall, compared with 12.8 per cent for investors and 12.9 per cent for FHBs.
PRD also identified potential investor openings following the federal government’s sweeping changes to negative gearing and capital gains tax (CGT) arrangements.
It said the tax changes had created an “opportunity for eagle-eyed investors, capitalising on lower demand and consulting on investment structures”.
Repayment pressure rises, but arrears remain contained
Despite weaker affordability, PRD said arrears remained below 1.5 per cent across borrower segments for both 30-plus-day and 90-plus-day measures.
The report noted that less than 0.5 per cent of Australian home loan balances were in negative equity, with PRD describing the limited movement between January and July 2026 as “surprisingly” small.
It also cited Reserve Bank of Australia modelling suggesting fewer than 1 per cent of mortgages would enter negative equity even following a 20 per cent price fall scenario.
However, Experian’s Housing Pressure Report showed that the number of mortgage accounts exhibiting repayment strain had increased 7.3 per cent in the first half of 2026, compared with 2.3 per cent a year earlier.
By June, 1.8 per cent of accounts showed strain, encompassing arrears, hardship arrangements and loan variations.
[Related: Borrowers reveal why they are deserting the housing market]
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