Mortgage Repayments Require Smaller Percentage of Income than in 1989

By: ce | 6 Jul 2015



News reports are often filled with doom-and-gloom stories about battlers struggling to enter the property market and make ends meet, especially in high-demand areas like Sydney. However, according to new research from BIS Shrapnel the situation isn’t as bleak as some media outlets make it appear. Its study found it’s easier to pay off a mortgage today than it was in 1989.

In 1989, property owners spent almost half of their household income on their mortgage. Today they’re spending only a little more than a third, despite average homes in boom areas like Sydney costing more than seven times as much. Remarkably, homeowners in the New South Wales’ capital are spending even less of their income on their mortgage repayments than they did in 2004, when local property prices last boomed. Back then, the average mortgage took 40.9 percent of household incomes.

Record low interest rates have helped make housing more affordable than it was decades ago, according to BIS Shrapnel analyst Angie Zigomanis.

“Between 1987 and 1989 housing prices almost doubled in Sydney and the RBA pushed the interest rate to 17 per cent to put the brakes on that growth,” she explained to “They ended up overdoing it and the country plunged into a recession.”

It’s important to note that while a mortgage takes less from a household income than it did in the past, high property prices mean saving an appropriate deposit is taking longer. A 25 percent deposit cost a year’s household income in 1989, but today it takes 20 months of earnings.

It may take time to save for a deposit, but the research suggests the effort is worth making, whether you’re looking to own your own home or develop an investment portfolio. If you want to take advantage of record low interest rates and own property sooner, contact Chase Edwards for a free financial health check on 1300 854 833 (NSW) or 1300 440 281 (Qld).