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$140 less a month: how falling mortgage repayments are pushing up property prices
The RBA has left the cash rate on hold today at 0.10 per cent, despite escalating property prices across the country.
Record-low mortgage rates (see below for current rates) mean people can borrow tens of thousands of dollars more from the bank, without a spike in monthly mortgage repayments.
In fact, mortgage repayments for an average home buyer have actually dropped since the previous housing peak of October 2017.
Analysis of owner-occupier rates from RateCity.com.au and property prices from CoreLogic show mortgage repayments are $140 less a month for the average new home buyer than in the previous housing peak of October 2017.
This is because the average owner-occupier interest rate has dropped by 1.42 per cent in this time, according to the RateCity.com.au database.
| Family (1.5 x full time income) | |||
| Previous peak (Oct 2017) | Today | Difference | |
| Median dwelling value (national, Core Logic) | $537,883 | $598,884 | $61,001 |
| Average home loan rate | 4.30% | 2.88% | -1.42% |
| Monthly repayment | $2,129 | $1,989 | -$140 |
| Annual income (1.5 x ordinary full-time wage) | $122,429 | $133,505 | $11,076 |
| Monthly mortgage repayments to income ratio | 21% | 18% | -3% |
| Debt to annual income ratio | 3.51 | 3.59 | 0.07 |
Sources: CoreLogic, ABS, RateCity.com.au (see full notes at end).
RateCity.com.au research director, Sally Tindall, said: “Ultra-low interest rates have put a rocket under the property market and it’s showing no signs of slowing down.”
“While low rates are driving current prices north, predictions of up to 20 per cent property price rises over the next couple of years are pushing people to panic buy,” she said.
“First it was toilet paper, now it’s property. People are rattled because they don’t want to miss out.
“The reality is thousands of families have already, or will soon, find themselves priced out, particularly in hotspots such as Sydney and Melbourne.
“While the RBA is unlikely to raise rates to keep a lid on the market this year, the regulator could respond by putting caps on risky lending for some borrowers.
“If you are looking to buy a home, don’t just work out the monthly mortgage repayments, look at how much debt you’re willing to take on.
“Interest rates are keeping mortgage repayments manageable now, but home loans are a 30-year commitment. The last thing you want is to be saddled with debt you can’t afford to repay in five- or ten-years’ time.
“In this unpredictable life, jobs can be lost, or incomes slashed without warning. When it comes to a home loan, don’t bite off more than you can chew,” she said.
Home loan rates
Analysis of the RateCity.com.au database shows:
- Since 1 January, 40 lenders have cut 606 fixed and variable home loan rates.
- 14 lenders have hiked 63 home loan rates in the same time period.
- Currently 56 lenders are offering 151 home loan rates under 2 per cent.
Lowest fixed rates on RateCity.com.au
| Fixed term | Lender | Advertised rate |
| Variable | Homestar Finance, Reduce Home Loans | 1.79% |
| 1-year | Greater Bank | 1.69% |
| 2-year | HSBC, Homestar Finance | 1.88% |
| 3-year | UBank | 1.75% |
| 4-year | Westpac, St George, Bank of Melbourne | 1.89% |
| 5-year | Aussie | 1.99% |
Source: RateCity.com.au. LVR restrictions may apply
| Single buyer | |||
| Previous peak (Oct 2017) | Today | Difference | |
| Median property value (national, CoreLogic) | $537,883 | $598,884 | $61,001 |
| Average home loan rate | 4.30% | 2.88% | -1.42% |
| Monthly repayment | $2,129 | $1,989 | -$140 |
| Annual income (ordinary full-time wage) | $81,619 | $89,003 | $7,384 |
| Mortgage repayments to income ratio | 31% | 27% | -4% |
| Debt-to-income ratio | 5.27 | 5.38 | 0.11 |
| Sources: CoreLogic, ABS, RateCity.com.au (see full notes at end). |
Notes:
- Dwelling prices are from CoreLogic Hedonic Home Value Index Results (October 2017, February 2021).
- Income is based on the full-time adult average weekly ordinary time earnings from the ABS (November 2017, November 2020) using seasonally-adjusted data. A family income has been estimated at 1.5 times this wage.
- Average rates are for new owner-occupiers paying principal and interest across fixed and variable loans on RateCity.com.au (October 2017, March 2021).
- Monthly repayments are based on someone paying principal and interest on a 30-year loan with a 20 per cent deposit. Assumes stamp duty is paid upfront.
- Debt-to-income ratio is based on the loan size and the households’ total gross annual income.
Disclaimer
This article is over two years old, last updated on March 2, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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