Households saddled with huge mortgage debt in Australia
A national snapshot of mortgages has revealed shocking insights into Australia’s housing market, including our most unaffordable city, the number of retirees who still owe the bank and the suburbs where single men and women live.
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Exclusive: One in eight home loan customers are aged 60 and above, and could be left paying mortgages off until their 90s, an alarming new report has found.
Australia’s capital cities – including Sydney, Melbourne and Adelaide – have among the highest house prices compared to household income ratio in the world.
Credit reporting company Illion’s inaugural report, Mortgage Nation, the Great Australian Debt, is one of the most comprehensive reports ever done on the state of Australia’s $2.1 trillion mortgage market.
It has examined 80 per cent of all mortgages in Australia and found:
• 12 per cent of Australians aged 60 plus have a home loan
• Australians aged 71 plus owe $30.1 billion in mortgage debt of the $2.1 trillion market
• Sydney has the second highest median dwelling price to household income ratio (12.9 times) in the world, behind Hong Kong (19.4 times). Melbourne placed fifth (9.9 times), Adelaide 16th (6.6 times), Brisbane 18th (6.3 times) and Perth 21st (5.9 times)
• The average mortgage taken out in the past two years was $456,000
• One per cent of mortgages worth $20.4 billion are 30 or more days behind on repayments
Illion’s chief executive officer Simon Bligh said “Australians were bingeing on mortgage debt” in a low-interest rate environment, which was a major concern, particularly because so many Australians aged 60 plus could be paying off loans for decades to come.
“A lot of older Australians have mortgages and if they were to pay them off they would be paying them off into their 90s,” he said.
“The reality is what people will do is they will sell their house.
“Five per cent of people aged over 60 have taken out a mortgage in the last two years.”
The report found about 37 per cent of Australians are homeowners with a mortgage, 30 per cent own their home outright and 32 per cent are renters.
Mr Bligh said Australian house prices versus incomes levels “are among the highest in the world”.
Latest Australian Bureau of Statistics data showed in December the average owner occupier mortgage on existing dwellings rose to almost $500,000 for the first time.
In NSW it was $621,500, Victoria, $517,900, Queensland $419,800, SA $358,000, WA $409,000, Tasmania $333,000 and NT $370,000.
AMP chief economist Dr Shane Oliver said in Australia “for every $1 after-tax income there’s $2 of debt”.
“Go back 30 years, the level of household debt for every $1 of household income was about 50 cents, so we’ve seen almost a fourfold increase in the ratio of debt to income since the early 1990s,” he said, adding higher debt levels had resulted in people paying more for property, which had also increased house prices.
Dr Oliver expects the Reserve Bank of Australia could cut the cash rate again as soon as next month or April, reducing it to a record-low of 0.5 per cent.
ABS figures showed last week the unemployment rate rose from 5.1 to 5.3 per cent in January.
Matt O’Sullivan, 34, and his wife Claire Parker O’Sullivan, 32, purchased their first home a two-bedroom terrace in Darlington in Sydney’s inner-west in 2016 for about $1 million.
They now have a mortgage for about 80 per cent of the property’s value and are looking to upgrade to a bigger home as they plan to have a family.
“With property prices so high in Sydney it’s difficult for first home buyers to get a foothold into the market,” Mr O’Sullivan said.
“We are paying extra on our mortgage at the moment to get ahead in a low interest rate environment but if prices go up we will have to reassess our strategy.”
He said they will have to sell their existing home to upgrade to a bigger home.
Originally published as Households saddled with huge mortgage debt in Australia
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