Tax cuts mean bigger home loans but also greater mortgage stress

Homebuyers prepared to delay their purchase until the stage 3 tax cuts come into play stand to increase their borrowing power by tens of thousands of dollars – but there’s a catch.

Homebuyers prepared to delay their purchase until July when the government’s stage 3 tax cuts come into play stand to increase their borrowing power by tens of thousands of dollars, but there’s a catch – they’ll put themselves in mortgage stress doing it.

According to exclusive Canstar research, based off an annual average SA income of $90,241, and annual expenses of $21,840, a single buyer can currently borrow up to $331,000, which enables them to buy at $413,750 if they have a 20 per cent deposit.

Were they to hold out until the stage 3 tax cuts come into effect in July, their borrowing capacity increases by $15,000 to $346,000, allowing them to buy a $432,500 home, or one worth $18,750 more.

Dual income households with expenses of $31,670 and the equivalent of 1.5 average incomes will see their borrowing power grow by $21,000 under the cuts, with their borrowing capacity increasing from $544,000 to $565,000, and their purchasing power up $26,250 from $680,000 to $706,250.

Dual income households with two average incomes and annual expenses of $31,670 will be able to borrow $29,000 more when their borrowing capacity increases from $778,000 to $807,000.

This means they will be able to buy up to $1.00875m – up $36,250 from the $972,500 they can currently afford.

Canstar group executive finance Stephen Mickenbecker said buying a home for singles was, and would continue to be a struggle.

“The average income’s lower – $5000 below Queensland and $6000 below Victoria so your borrowing power is lower,” he said.

“So, it’s going to be a struggle and it will be a home unit in probably an outer area of Adelaide.”

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He said couples on two average incomes would find it much easier.

“You’ve got a workable size loan and an affordable loan, and you can get into the market in the inner suburbs,” he said.

But before you splurge, be warned – borrowing up to these new limits will put those on an average income into mortgage stress.

According to Canstar, any loan over $343,438 will put a single buyer in mortgage stress – where a borrower is spending more than 29.99 per cent of their gross income on loan repayments.

Anything more than $515,157 will put a 1.5 income equivalent-earning couple into mortgage stress, and dual-income purchasers should set a cap at $686,877.

The calculations are based on the average owner occupier variable loan on Canstar’s database with an 80 per cent LVR 30-year loan and a 3 per cent interest rate buffer.

Cedar McGearey and their daughter Siya, 3, have been living at their current rental for several years now. They would like to see relief for those saving for a mortgage, and incentives to help them do so. Picture Dean Martin

Harcourts Packham managing director James Packham said, with the housing crisis at the forefront of public discourse, political parties were gearing up to address the issue in the 2025 election, and encouraged hopeful buyers to seek professional advice on their individual situations.

“Proposed housing policies are expected to shape the future dynamics of the real estate market, offering potential solutions to current challenges,” he said.

“Personalised solutions and expert guidance are invaluable for individuals navigating the competitive market.”

Cedar McGearey, 27, of Hectorville, is renting with their partner and daughter Siya and said while they were thankful to hear they could borrow more when it comes time to buy, that goal seemed a long way off.

“We’re already spending more than a third of our income on rent, and then with the cost of living going up as well, it’s almost impossible to save for a deposit,” they said.