Lending rates would have to rise to 5.8 per cent for Brisbane to be at its worst affordability in a decade but that could be triggered earlier if house prices surge.
New data shows Brisbane housing affordability has taken a big hit this year despite record low rates, amid fresh warnings of what would trigger its worst level in a decade.
Research released by Moody’s Investors Service Monday found the average Brisbane household now needed 20.6 per cent of two incomes to afford repayments on new mortgages which, while lower than the national average (25.1 per cent), was a deterioration for the Qld capital.
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“If mortgage lending rates rise from the current average of 3.45 per cent to the 10-year average of 4.79 per cent, the affordability measure will increase 3.8 percentage points to 28.9 per cent (nationally).”
The average Brisbane household needs 20.6 per cent of two incomes to afford repayments on new mortgages now. Picture: NCA NewsWire / John Gass
The research found that lending rates would have to rise to 5.8 per cent for Brisbane to be at its worst affordability in a decade, while Sydney would hit that at 3.87 per cent interest, 4.3 per cent for Melbourne, 8.3 per cent for Perth and 6.2 per cent for Adelaide.
But, it warned, “if housing prices rise a further 10 per cent, then interest rates will only have to increase to 3.87 per cent to push the housing affordability measure above the 10-year peak of 28.9 per cent for Australia on average”.
The data showed affordability had deteriorated significantly across all the major capitals.
“It worsened because housing prices increased strongly, while household incomes were stagnant. Mortgage lending rates declined, but not enough to offset housing price gains.”
“Over the rest of 2021 and into early 2022, we expect housing affordability will continue to deteriorate moderately, because property prices will continue to increase, while mortgage lending rates and household incomes will stay broadly steady.”
But while ongoing property price rises were to blame for the affordability slump for new borrowers, it also meant banks were less likely to be concerned about current mortgage holders “because borrowers in financial difficulty are more likely to be able to sell homes to repay debts and avoid default”.
Housing affordability is calculated as a proportion of the monthly loan repayment amount to the average monthly household income, using rolling three month median housing sale prices, an 80 per cent loan-to-value ratio, a 25-year principal and interest mortgage term and lending rates equal to the average discounted variable interest rate for owner-occupiers published by the Reserve Bank.
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