Home Mortgage Payments A Little Easier On The Pay Packet

Home loans are more affordable now than at any time since June 1988, according to figures released yesterday by the Real Estate Institute of Australia.

In its latest quarterly report, the institute says the ratio of average monthly loan repayment to median household income fell to 29.3 per cent in the September quarter, from 32.2 in the June quarter. The September ratio was the lowest since the June quarter of 1988 in most states.

The institute says the improvement was due to falling interest rates and a reduction in the size of the average home loan. Average home loan interest rates charged by banks fell to 13 per cent in the September quarter, from 13.8 in the June quarter.

The average Australian home loan fell to $76,716 in the quarter, from $79,327 the previous quarter.

The biggest improvement in home loan affordability was in New South Wales, where the ratio fell by 6.4 percentage points to 34.9 per cent. The ratio improved by 1.9 percentage points in Victoria and South Australia, to 27.9 and 27.2 per cent respectively.

The Australian Capital Territory was the only area to record a deterioration in affordability. The ratio there rose by 0.9 percentage points to 22.1 per cent.

The average monthly home loan repayment in Australia in the quarter was $866. The highest average repayment was $1040, in NSW; the lowest $562, in Tasmania, The average in Victoria was $856.

Bureau of Statistics figures released last week showed that the number of housing loans for new and established homes fell sharply in October.

The institute's deputy chief executive, Mr Bryan Douglas, said yesterday the figures suggested that, while home loan affordability had improved and loans had become more attractive, the recession and high unemployment had created a crisis of confidence and many people were reluctant to borrow money.

``We would argue that another interest rate cut is badly needed to inject some confidence back into the housing market." Mr Douglas said that, with the affordability ratio below 30 per cent in all states and territories except NSW, most Australians on median incomes were eligible under the home lending criteria of most institutions for the average size loan.

``We believe that is very good news for home buyers. It means that people who decide to buy a home when the economy starts to pick up will be in a much better position than in 1989, when the affordability ratio was higher."