Elevated interest rates and property prices push home loan repayments to record highs
Mortgage stress among first-home buyers has spread across nearly all major Australian cities due to high interest rates and rising property prices, according to a report by Domain.
In 2019, mortgage stress — defined as repayments exceeding 30% of household income — was only recorded for entry-level houses in Sydney and Melbourne. Now, all major cities except Darwin are affected, Domain’s report revealed on Wednesday.
For units, no city faced mortgage stress five years ago, but Sydney, Brisbane and Adelaide have since crossed that threshold.
The report found that households in major cities now allocate over 47% of their income to mortgage repayments for entry-level houses. In Sydney, one of the world’s least affordable property markets, that figure rises to 57.6%.
“This trend shows how rising interest rates and property prices have compounded, pushing households into larger mortgage repayments,” said Nicola Powell (pictured above), chief of research and economics at Domain. “Ongoing challenges like housing undersupply remain, making it crucial to ensure adequate, affordable, and sustainable housing into the future.”
Powell noted that aggressive interest rate hikes in 2022-23 took a huge toll on mortgage serviceability. However, she said recent price stabilisation and the first rate cut in four years points to gradual relief.
The Reserve Bank of Australia (RBA) last week cut its benchmark rate to 4.1% but signalled a cautious stance on further easing. Following the decision, mortgage rates nationwide have fallen to their lowest levels since early 2023, with sub-6% offers becoming increasingly common. Still, housing affordability remains a key political issue ahead of the upcoming federal election, with cost-of-living pressures ranking among voters’ top concerns.
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