Australia has the world’s highest rate of mortgage pain

Homeowners in Australia allocate a higher share of their income to mortgage repayments than any other developed nation, according to the International Monetary Fund (IMF). In its Global Financial Stability Report released this month, the IMF says Australian households allocated 15% of income to home loan repayments in December 2022, the highest level among all advanced economies.

Although official interest rates in Australia are slightly lower than other developed countries, we have the second highest level of household debt in the world – primarily due to high house prices – and 75% of our home loans are on variable rates. This makes Australia different to many other advanced countries where longer fixed-term home loan arrangements are the norm.

The Reserve Bank of Australia (RBA) says Australians are keeping up with home loan repayments but are cutting spending in other areas to cope with higher interest rates and inflation. In a report released this month, the RBA said some homeowners were taking on extra work, or drawing down on savings buffers, to cope with the higher costs of living. “Many households continue to face a squeeze on their budgets as high inflation and the increase in interest rates over the past 18 months have reduced available income after essential expenses and housing costs. Consistent with this, consumer sentiment remains near historically low levels, particularly for owner-occupier mortgagors,” the RBA said.

Home loan repayments for most borrowers have increased by between 30 percent to 50 percent since the RBA began hiking interest rates in May 2022. “Borrowers with high debt relative to their income – including some new mortgagors and first home buyers – have been particularly affected as their scheduled loan payments relative to income have increased by a greater amount than those of other borrowers,” the RBA said.

However, very few Australians have fallen behind on their loan repayments or sought temporary loan modifications from their lenders. “In the event that more borrowers became unable to service their loans, only a very small number would be in negative equity on their mortgage. As a result, losses to lenders are expected to remain low and manageable.”

The IMF noted that supply constraints have contributed to house prices remaining above pre-pandemic levels in many countries, thereby “complicating central bank efforts to bring inflation back to target”. This is certainly the case in Australia, with the latest inflation data released by the Australian Bureau of Statistics yesterday showing rents and new housing purchases, along with petrol prices, were the biggest contributors to the 1.2% rise in inflation over the September quarter.

CoreLogic Research Director Tim Lawless draws a direct correlation between the surprisingly strong rebound in home values across most markets in 2023 with the low number of homes for sale. The latest CoreLogic data shows that during the September quarter, home values grew most in Adelaide at 4.3%, Brisbane at 3.9% and Perth at 3.6%. Mr Lawless said: “The three capitals recording the highest capital gain each have advertised supply levels that are around 40% below their previous five-year average. Advertised supply levels across Hobart, where values are still trending lower, have been holding at above-average levels since June last year and were almost 40% above its five-year average.”

Most experts say the rate hiking cycle in Australia is coming to an end as inflation continues to trend down. Demand in the property market appears set to remain strong, with the usual seasonal increase in the number of homes for sale in Spring failing to put any meaningful brake on price growth. A high rate of migration over the next five years is likely to exacerbate demand, while new housing starts remain suppressed due to high construction costs and labour shortages.

Tips from RateCity to manage your mortgage

Ask your lender for a lower rate:

If you have a good credit score and always make timely repayments, your lender may not want to lose your business and might offer you an interest rate discount or perhaps waive some fees.

Refinance to reduce your interest:

If you’ve managed to build up some equity in your property, you may be in a position to refinance your home loan with another lender on a lower interest rate.

Make extra repayments to lower servicing costs:

By making extra home loan repayments on top of your obligations, you may be able to shrink your home loan principal and therefore reduce the interest charged on your mortgage.

Held by the same family for 26 years, this Harbour Bridge-facing residence at Longueville is the type of property that rarely comes to market. Set on more than 1,100 sqm on one of Sydney’s most tightly held peninsulas, it combines complete privacy with uninterrupted views across the harbour to the city skyline.

It’s the sort of offering where the land is just as important as the home. Positioned directly opposite Aquatic Park with a prized northeast aspect, the residence captures sweeping harbour views from almost every main living space while remaining remarkably secluded from neighbouring properties.

Large picture windows frame the outlook throughout the home, flooding the interiors with natural light and making the harbour the centrepiece of everyday living.

Designed for family living

The home offers multiple living zones, including a formal lounge and dining rooms, a separate family room and an open-plan living and meals area. Blackbutt timber parquetry flooring, high ceilings and ducted reverse-cycle air conditioning feature throughout.

The kitchen sits at the heart of the home, with induction cooking, a generous island bench, and a walk-in pantry, connecting both the formal entertaining areas and the more casual family spaces.

A ground-floor master suite includes a walk-in robe, dressing area and ensuite, while upstairs are three additional bedrooms with built-in robes, together with a spacious home office or study.

The lower ground level adds another layer, with a temperature-controlled cellar and tasting room, plus a flexible gym, wellness or recreation space.

Resort-style setting overlooking Sydney Harbour

Outside, landscaped gardens wrap around a heated swimming pool, an expansive entertaining terrace, and a level lawn, creating a private resort-style setting against the backdrop of Sydney Harbour.

Additional features include a solar system with battery storage, remote lock-up garaging for three vehicles and generous storage throughout.

Beyond the home itself, the location remains one of Longueville’s biggest drawcards. Longueville Ferry Wharf sits around 150 metres away, providing direct access to the CBD while preserving the quiet character of one of Sydney’s most tightly held waterfront suburbs. The property is also within the catchments of Lane Cove Public School and Hunters Hill High School.

Simon Harrison and Kim Walters of Belle Property Lane Cove are marketing the property on a Contact Agent basis.

At a glance

Address: 3 Mary Street, Longueville NSW 2066

Configuration: 4 bedrooms | 3 bathrooms | 3-car garage

Land: Approximately 1,100 sqm

Highlights: Harbour Bridge and city skyline views, northeast aspect, heated pool, cellar, solar with battery storage

Held: First time offered in 26 years

Price: Contact Agent

Agents: Simon Harrison and Kim Walters, Belle Property Lane Cove

This article is produced by the Kanebridge Media editorial team. Property information has been supplied by the listing agent. Buyers should conduct their own due diligence before relying on any information contained in this article. Enquiries: propertyconcierge@kanebridge.com.au.