Mortgage payments are eating up more of Australian income than ever before. Figures released by the Reserve Bank yesterday show that an all-time record 9.5 per cent of household disposable income is being spent meeting mortgage payments, well up on the 8 per cent of take-home pay devoted to repayments at the time of the last election.
That election was fought and won by the Coalition on a promise of “keeping interest rates low”.
During the 2004 televised election debate the Prime Minister claimed that “paying off a home is easier now then it would have been” had Labor’s interest rates remained.
But the household finance figures released yesterday cast doubt on that claim. They show that under Labor in 1989 mortgage payments peaked at just 5.1 per cent of household income.
The new all-time record of 9.5 per cent of disposable income devoted to mortgage payments is an average rather than a representative figure. Most households make no mortgage payments. Many of those that do are now in “mortgage stress”, devoting in excess of 30 per cent of their income to repayments...
Mortgage payments have climbed despite generally lower interest rates as house prices and the amounts borrowed have soared.
The data shows that payments began climbing sharply as a proportion of household income at the turn of the century 7 years ago and have barely slowed since. Mortgage payments now eat up twice as much of household income as they did back then.
One contributing factor is thought to be the government’s effective halving of the headline rate of capital gains tax late in 1999 which bought investors into the housing market pushing up prices.
As well mortgage rates have been lifted 8 times since then, 3 of them last year. Should the Reserve Bank lift interest rates again later this year as is expected the holder of a $400,000 mortgage will be paying $380 more in interest per month than at the time of the last election.
Total interest payments on all types of loans have also hit a new record high, climbing to 11.9 per cent of household disposable income in March, up from 7.6 per at the turn of the century.
Labor’s Treasury spokesman Wayne Swan said the figures showed how deeply out of touch the Prime Minister was with large sections of when he claimed that “Australian working families have never been better off”.
Mr Howard replied that Australians were buying more expensive houses and that by a different measure “the average mortgage repayment on a new owner-occupied loan as a share of average disposable income” was below its 1989 peak.
But he said he recognised that some families were doing it tough. “No matter who is in office, there will always be some families who miss out. But if you look at overall wages, if you look at unemployment, you will find that if fairness in Australia is at a 32-year high”.
