Housing Loans Are Now More Affordable

HOME loan affordability continues to improve according to the Citibank/REI Home Loan Affordability Index for the December quarter 1996.

Commenting on the index results, the president of the Real Estate Institute of NSW, Mr Robert Weight, said that lower interest rates, brought about by the low inflation environment and increased competition between bank and non-bank lenders, have been major factors in the continuing improvement in home loan affordability.

According to the index, the affordability ratio (average new loan repayments as a percentage of median family income) for NSW improved by 3.4 percentage points to 30.0 for the December quarter 1996, compared with 33.4 in December 1995.

"Effectively this means that home buyers paid, on average, 30 per cent of the median family income during the December quarter 1996 compared to 33.4 per cent in December 1995.

"In December 1989, when interest rates were 17 per cent, the percentage of family income was 44.7 per cent, so we have seen a continuing and dramatic improvement in affordability conditions," said Mr Weight.

Average monthly home loan repayments in NSW in December 1996 were $1,077 compared with $1,085 in September 1996 and $1,173 in December 1995.

"The institute expects home loan affordability conditions to remain favourable during 1997," he added.