Home Loan Costs Soar To 3-year High - Study

Canberra.

More home-owners could be running the risk of defaulting on their housing loans, industry figures suggest, as loan affordability fell for the fifth successive quarter to its worst level in more than three years.

The president of the Real Estate Institute of Australia, Mr Gary Taplin, said there were no signs of any improvement in the medium term.

The last rise in variable interest rates was more than six months ago, but the effect of the three-stage increase in official rates late last year has continued to bite.

During the March quarter, average monthly home-loan repayments increased by 10.6 per cent, according to findings in the home-land affordability indicator released yesterday by the institute and mortgage insurer MGICA Ltd.

For Victorians, the average increase in repayments was $77 a month, from $825 to $902. A family income of $43,272 is needed to meet these repayments in Victoria The national average family income is $46,755.

The Australian average monthly repayment is $974, with NSW ($1136), the ACT ($1009) and the Northern Territory ($1002) all above average.

But paying off a loan in the ACT and NT is considered more affordable because of higher incomes there.

Although the delivery of a Budget surplus in May gave hope of interest-rate relief, last Friday's record current-account deficit put paid to any early reductions.

Mr Taplin said the chance of any medium-term improvement in affordability was poor, and he attacked the Government's stance on interest rates.

``Again we see the unfair consequences of the Government's over- reliance on monetary policy," he said. ``Unnecessarily high interest rates are making it increasingly difficult for the average Australian to afford a home, especially for the first-home buyer."

Mr Taplin also criticised the governor of the Reserve Bank, Mr Bernie Fraser, for saying on 13 June that the next move in interest rates was just as likely to be upwards as downwards.

This had done nothing for consumer and investor confidence, Mr Taplin said, and the Government needed to take further steps to set economic conditions for lower interest rates.

The managing director of MGICA, Mr Ian Graham, said that even with the recent reduction in fixed rates, the uncertainty over variable rates continued to have an impact.

It appeared that many people encouraged by low rates and availability of finance in 1993-94 had overcommitted themselves and could now be in line to default, he said.