Australian borrowers are better off now than they were 28 years ago, despite slow inflation and wage growth, according to RateCity.
Analysis undertaken by the financial comparison website suggested that mortgage holders are using 28.91 per cent of their income paying off their mortgages, markedly down from the percentage needed to service home loans in 1990, when the cash rate was at its peak of 17 per cent, according to RateCity.
Pointing to data from the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS), the rate comparison website noted that in February of 1990, borrowers with an average salary of $27,284 were using 42.45 per cent of their income to service an average loan of $67,700 with an interest rate of 17 per cent.
RateCity added that with the average salary now at $81,619, borrowers currently use 28.91 per cent of their income to service an average loan of $388,100 with an interest rate of 4.5 per cent.
“Now we’re living in a period of record long, record low interest rates,” RateCity money editor Sally Tindall said.
“The key difference between 1990 and today is that average mortgages have risen nearly two times faster than wages.
“So, when it comes to paying down the mortgage each month, when you factor in the record low interest rates, we’re actually better off.”
Further, Ms Tindall claimed that borrowers are better off, but she noted the difficulty that first home buyers are facing in saving for home deposit.
“[Ask] a first home buyer to stump up a 20 per cent deposit today, and you’ve got them snookered before they’ve even started,” the money editor said.
According to CoreLogic’s Hedonic Home Value Index, as of May, the national median home value now sits at $555,274, with the combined capital city median home value at $654,710, and the combined regional market median home value at $365,792.
First home buyers in Sydney face the greatest challenge in saving for deposit, with the median home value at $871,454.
However, national home prices fell by 0.1 per cent in May, driven by a drop in dwelling values across the nation’s capital cities.
Home values fell sharpest in Melbourne (0.5 per cent), followed by Sydney and Canberra (0.2 per cent), and Perth and Darwin (0.1 per cent).
Despite a 0.8 per cent price growth in Hobart, a 0.5 per cent rise in Adelaide and a 0.2 per cent jump in Brisbane, combined capital city dwelling values slipped by 0.2 per cent in May.
Dwelling values outside of the capital cities nudged 0.2 per cent higher over the month to reach a new record high in May, CoreLogic said.
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