Australian housing the most affordable in a decade

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on October 27, 2020
Australian housing the most affordable in a decade

Photo by Natalie Su on Unsplash

Housing was the most or near the most affordable in a decade in September, according to Moody's.

Australian households with two income earners needed 23.0% of monthly income to meet mortgage repayments on new loans in September 2020, down from 25.1% a year earlier. 

Moody's said the fallout from COVID, record low interest rates, and government support schemes like JobKeeper had all contributed to the rise in affordability.

"Australian housing prices declined an average 1.5% over the five months to September 2020 because of the economic fallout from the coronavirus, though prices still rose 3.2% over the year to September," Moody's said.

"The Reserve Bank of Australia (RBA) lowered the official cash rate to a record low 0.25% in March to combat the economic downturn triggered by the pandemic, driving mortgage interest rates down.

"Government assistance payments have supported household incomes since the coronavirus pandemic.

"Before the pandemic, average household incomes were increasing, rising 5.4% over the year to May." 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 21, 2022. View disclaimer.

In Sydney, new borrowers needed 29.9% of household income to meet mortgage repayments in September, compared with 30.9% a year earlier and 32.7% on average over the last 10 years.

However, Sydney remained the least affordable city for housing in Australia.

In Perth, new borrowers needed 15.0% of household income to meet mortgage repayments in September 2020, the lowest in a decade and down from 17.4% a year earlier.

Perth was the most affordable capital city for housing in Australia.

Moody's said it expected the trend of rising affordability to continue into 2021.

"We expect interest rates to remain low for the foreseeable future," it said. 

"Housing prices will likely see some downward pressure as the result of the macroeconomic weakness, albeit the impact may be muted due to the low interest rates.

"Conversely, household incomes will come under pressure in coming months as government income support measures such as JobKeeper and Jobseeker end, but we do not expect this to outweigh the impact of low mortgage interest rates and housing price movements." 

RBA rate cut to further improve affordability? 

The RBA is widely tipped to cut the cash rate by 15 basis points to a new record low on Melbourne Cup Day. 

Whether this cut is passed onto home loan rates remains to be seen, with lenders' margins already tightly squeezed, and several lenders offering sub 2% mortgages. 

In a speech earlier in the month, RBA Governor Phillip Lowe said the central bank's analysis had revealed a cut would be more effective now than in previous months when most states were experiencing lockdowns. 

"When the pandemic was at its worst and there were severe restrictions on activity we judged that there was little to be gained from further monetary easing," Dr Lowe said.

"The solutions to the problems the country faced lay elsewhere.

"As the economy opens up, though, it is reasonable to expect that further monetary easing would get more traction than was the case earlier."

Dr Lowe again ruled out negative interest rates and said the cash rate was unlikely to be raised before 2023. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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