admin-ajax.php

28 years since rates were at 17 per cent; are we any better off?

I know first home buyers are having trouble getting into the property market, but believe it or not it’s cheaper to afford a home today than it was 28 years ago.

When the RBA meets next Tuesday they are set to leave the cash rate on hold – the 20th consecutive decision to keep the cash rate at a record low of 1.50 per cent.

 RateCity spokesperson Sally Tindall said that while sluggish inflation and wages growth figures had the RBA in a strong-hold, it was worth looking back at the state of play. Reserve Bank Of Australia

“The highest interest rate on record was in February 1990 at 17 per cent – a reality many Australians would rather forget.

 “Now we’re living in a period of record-long, record-low interest rates.

“The key difference between 1990 and today is that average mortgages have risen nearly two times faster than wages.

“So, when it comes to paying down the mortgage each month, when you factor in the record low interest rates, we’re actually better off. But ask a first home buyer to stump up a 20 per cent deposit today, and you’ve got them snookered before they’ve even started,” she said.

Year

Cash rate 

Average loan size

Average annual wages 

% of income on mortgage

1990 (Feb)

17.0

$67,700

$27,284

42.45%

2018

1.50

$388,100

$81,619

28.91%

Source: RBA lending indicator rates, ABS Housing Finance Australia, Housing Finance Commitments, ABS Average Weekly Earnings Australia – Original.

If a single person took out an average sized home loan in the 1990s when rates were at 17 per cent they would have spent 42.45 per cent of their income on mortgage repayments.

If they took out the same loan today with a lower rate of 4.50 per cent, taking into account house price increases and wages growth, the same person would spend 28.91 per cent of their income on mortgage repayments.

Rateforecaster June V2

Property investors 570x292


icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

 

NEED HELP LISTENING TO MICHAEL YARDNEY'S PODCAST FROM YOUR PHONE OR TABLET?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

is a Property Strategist with an accounting background and over 30 years’ Commercial Banking experience. She is a passionate property investor who enjoys helping her clients create wealth through property investment using Metropole’s strategic approach.
Visit www.MelbourneBuyersAgent.com.au


'28 years since rates were at 17 per cent; are we any better off?' have 1 comment

  1. Avatar for Property Update

    June 1, 2018 @ 3:58 pm Bradboy03

    I thought every one was worried because 50% of household debt is mortgage. 28% does not sound correct sorry. It definitely dosent apply to Sydney. Also petrol was $1.85 today so give me a break.

    Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!