How stage 3 tax cuts will boost borrowing power for home buyers

Australian homebuyers are set to receive their biggest boost to borrowing power since the pandemic interest rate crash with July 1 stage 3 tax cuts to add as much as $46,000.

Australian homebuyers are set to receive their biggest boost to borrowing power since the pandemic interest rate crash with July 1 stage 3 tax cuts to add as much as a $46,000 increase.

Exclusive analysis by Canstar for the National News Network found the federal government’s stage 3 tax cuts would see give the average single income earner on $98,218 a $17,000 leg up in borrowing power to $389,000 – lifting purchasing power for those with a 20 per cent deposit to $486,250, a $21,250 rise.

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Steve Mickenbecker, Canstar group executive financial services.

Couples fared better still, with those with one full-time and one part-time partner able to borrow $23,000 more than pre-July 1 or $629,000, with purchasing power going to $786,250 – a $28,750 increase.

Double income couples are best off, with a $33,000 borrowing power increase to $893,000, while their purchasing power is well over the million mark at $1,116,250, up $41,250.

States with strongest average incomes fared better than the national figures, with Western Australia seeing the best results off its $109,600 annual gross income.

Western Australians will get the biggest boost off stage 3 tax cuts given they have the largest annual gross income of all states thanks to lucrative mining industry jobs.

Singles there see a $19,000 jump in borrowing power to $450,000, which would allow them to purchase up to $562,500 alone with a 20 per cent deposit, up $23,750.

Couples with one part-timer see a $33,750 boost to purchasing power of $901,250, while double income families will have a buffer of $46,250 more when homebuying up to $1.268,750.

The Australian Capital Territory was super close behind given its individual annual gross income of $108,555, with singles purchasing power up $22,500 from July 1 to $555,000, couples with one part-timer increasing $32,500 to $890,000 and double income couples up $46,250 to $1,255,000.

ACT residents have the second highest average income level in the country, and will see borrowing power gains off stage 3 tax cuts larger than national average.

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Canstar group financial services executive Steve Mickenbecker said the calculations took into account a 6.87 per cent interest rate based on the average owner occupier variable loan on their database, with annual income based on the ABS average weekly earnings data.

Borrowing power calculations assume a loan term of 30 years, annual expenses of $21,840 for a single and $31,670 for a couple (based on the Household Expenditure Measure (HEM) for Australians earning $80,000 to $90,000 per year), 80 per cent of income available to service the loan, and a 3 per cent interest rate buffer.

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Originally published as How stage 3 tax cuts will boost borrowing power for home buyers