Home Loans The Most Affordable In Six Years

Home buyers are enjoying the most affordable loans for six years, thanks to the lowest interest rates in 20 years, according to a quarterly survey released yesterday.

The survey, by the Real Estate Institute of Australia and the mortgage insurer MGICA Ltd, reveals that the ratio of average loan repayments to median family income fell to 22.7 per cent in the September quarter.

This was an improvement of 1.6 percentage points on the June quarter and 13.8 points below the peak of 36.5 per cent recorded for the September quarter in 1989.

The Real Estate Institute is predicting that home loans should remain at close to the present level of affordability next year because of a lack of upward pressure on housing prices and sustained low interest rates and inflation.

The survey shows that home buyers in NSW still pay a greater proportion of their family income in loan repayments compared with other States.

The percentage of median family income spent on home loan repayments for NSW was 26.9 per cent - or 4.2 per cent above the national average.

Nevertheless, the affordability of home loans for NSW home buyers for the September quarter was still the State's best result since the March quarter of 1986.

At 26.9 per cent, the percentage of median family income spent on loan repayments in NSW was also an improvement of 1.6 points on the June quarter this year, when it was 28.5 per cent.

The chief executive officer of the Real Estate Institute, Mr Phil Roberts, said that falls in interest rates and relatively steady house prices had produced improvements in the affordability of home loans in five successive quarters.

He said that the improvement in affordability of home loans could be expected to be sustained next year.

"With a low level of inflation underpinning lower interest rates and no upward pressure on house prices, the affordability level is going to attract many first home buyers," Mr Roberts said.

The managing director of MGICA, Mr Ian Graham, said that improvements to making home loans affordable were now reflected in the size of home loans.

According to the survey, the average monthly loan repayments in Australia were $690 for the September quarter compared with $741 for the June quarter.

The median annual family incomes for people making these repayments were$36,486 and $36,550 respectively.

For NSW, average monthly loan repayments were $818 for the September quarter compared with $886 for the June quarter. The median annual family incomes for these repayments were $36,554 and $37,313 respectively.

Mr Graham said home buyers had taken advantage of lower interest rates and this was shown by an increase in the average loan by 9.6 per cent to $84,090 since the September quarter last year.

The quarterly survey on home loan affordability in Australia is published jointly by the Real Institute of Australia and MGICA Ltd, and incorporates information from all major lending institutions.