The Australia Bureau of Statistics (ABS) has released data showing a 17.9 per cent rise in the value of new housing loans since March 2023.

The data reflects the Reserve Bank of Australia increasing cash interest rates 13 times over the last two years to combat inflation. 

As the price of homes and loan repayments have risen, so too has financial pressure caused by increased household items. 

The Consumer Price Index (CPI) measures the percentage change in the price of a basket of goods and services consumed by households and is a strong indicator of inflation.

Sutherland Shire mortgage broker Grahame Hale said that this current mortgage climate is causing his client mortgagees to make sacrifices in other areas of their budgets.

“It doesn’t take too long with interest repayments going up to have an impact on the economy,” Mr Hale said.   

“It’s about affordability. If you can’t afford your loan, then something else has to suffer.”

Mr Hale said that people are dedicating a larger portion of their take-home pay to servicing their home loans. However, raising wages to offset this could lead to higher inflation. Increased pay can drive up prices, further fueling the upward spiral of mortgage costs.

“People are getting higher wages,” he said.

“The reason people want higher wages is because they are paying higher interest payments. 

“It’s all very circular as to what effect this [higher wages] has on the CPI.”

There are ways for people to curb the increasing challenges of mortgage repayments. 

Web designer Phillip Andrew, 37, has a mortgage on a property on the Sunshine Coast that he purchased five years ago. He said the impact of the recent increasing cost of home loans has taken its toll.

To avoid paying the full cost of the interest rate hikes, Mr Andrew has regularly re-financed his mortgage. 

Refinancing involves shifting from your current lender to another lender, which is often between banks. 

He said that refinancing had reduced his repayments. 

“The banks prey on loyalty. So they are banking on you being too lazy and too content with the status quo that you don’t shop around,” he said. 

“All you’ve got to do is a couple of hours of research to find the better deals.

“Usually you can find some sort of cash-back offer which helps offset the cost of moving your loan because there are fees involved.

“You have just got to look at the landscape and be aware of what you’re actually paying currently. And then it is clear as day that you’re getting ripped off.”

Mr Andrew’s choice to refinance mirrors the increase in refinancing activity in Australia over the past 15 years.

More people are refinancing. Data: ABS

According to Mr Andrew, first-time home buyers face a huge problem in being locked out of the market due to high interest rates.

The growing value of mortgages means potential first-home buyers have less chance of purchasing a property. 

The Australia Institute found that 25 years ago, houses cost Australians nine years’ worth of their average household yearly income. That figure has risen to 16.5 years.

“I’m lucky in my case. My repayments are less than the market rate for renting a similar dwelling,” Mr Andrew said. 

“Most people I know are still renting because they can’t even get into the property market.”

Dwellings are becoming more expensive. Data: ABS

Mr Hale said that in addition to first-home buyers being unable to purchase property, those with property are also struggling to move up. 

He said that this is because even if people already have equity in a property, lenders are wary of their ability to meet the repayments. 

“If you’re a first-home buyer and you don’t have any equity in something, then you’ve got a real problem,” he said. 

“Very few young couples have equity.”

Mr Hale said one of his clients has a Queensland property valued at $800,000, which still has a $300,000 loan on it.  

“So he might get between $500,000 and $600,000 out of that property,” Mr Hale said. 

“What does that buy him in the Sutherland Shire, which is where he wants to look at the moment?” 

Mr Hale said he had another client who had $1.2 million in equity in a property at Taren Point.

“They went to their lender, who said that the property value wouldn’t help service a loan because they didn’t have the cash flow to match the commitments,” Mr Hale. 

“And this is happening for everyone.” 

One of the other elements impacting the current value of mortgages is the undersupply of housing across the country, which is driving up prices

According to 2022 Organisation for Economic Co-operation and Development data, Australia only had 420 dwellings per 1000 people, which ranks below comparably developed countries like the United Kingdom and the United States.

While cost-of-living relief was at the forefront of the federal government’s 2024 budget, Treasurer Jim Chalmers also announced significant housing funding.

This included an additional $6.2 billion investment in the $32 billion ‘Homes for Australia’ plan, aimed at providing more social and affordable housing. 

“We are easing the cost of living, and we are building more homes for Australians,” Mr Chalmers said in his 2024 budget speech.  

“More homes means more affordable homes and a better deal for buyers, builders and renters alike. 

“This budget includes another one billion dollars to help states and territories build more housing sooner.” 

The government aims to build 1.2 million houses over the next five years from August.

However, analysts have said that this target is unlikely to be achieved, in part, due to insufficient tradespeople being available to build these houses.