Home-buying Power On The Rise As New Lenders Move In
The Age
Friday April 19, 1996
THE level of housing affordability, measured by the relative ability of home buyers to service their loans, improved last year but remains a long way below the levels of the early 1980s.
The six months to December saw an improvement from 33.3 to 34.9 in the home loan affordability indicator calculated by the Real Estate Institute of Australia and mortgage insurance group MGICA. The indicator compares average monthly loan repayments and the level of family income required to meet them.
The statistics show that, in the December quarter, the average new-home loan decreased by 0.8 per cent, average monthly repayments fell by 1.6 per cent, and the median weekly family income rose by 1.6 per cent.
In Victoria, the average monthly loan repayment fell during the quarter from $890 to $866, while the average family income needed to service the loan repayments dipped from $42,720 to $41,587. This lifted the Victorian affordability rating from 39.0 to 40.8 for the quarter.
New South Wales, however, saw an opposite trend, with the affordability rating declining from 31.1 to 29.9 .
The improvement in housing affordability reflects the increased competition between lenders of housing finance, which has allowed many homeowners to refinance their mortgages on more favorable terms.
But the present HLAI figure of 34.9 is well below the 57.4 recorded in March 1980 when the median family income was $302 a week ($15,704 a year) and the national average monthly loan repayment was $228 ($2736 a year).
The lowest level reached by the index was 27.4 at the end of 1989 when the average monthly loan repayment soared to $1008.
While the present rating of 34.9 reflects current economic conditions, market commentators warn that recent improvements in housing affordability could quickly be cancelled out by any increase in official interest rates.
© 1996 The Age