Urban Taskforce CEO, Tom Forrest, said that today’s point interest rate increase, the 9th since May 2022, added more stress to the housing supply and affordability crisis. This demands a swift response from the bureaucratic and political leaders to deliver more housing, especially in NSW.
With typical mortgage rates now around 6% and set to climb even higher, many families were entering into the “red zone” of mortgage stress where the percentage of after-tax household income required to meet repayments was above 30%.
This is a massive change from where the economy was 12 months ago – when mortgage rates were down near 2%. Now we are faced with the prospect of home loan mortgage rates getting close to 7%.
The practical impact on families is equivalent to the start of the recession in the early 1990’s when the cash rate hit 17.5%. This is because the prices being paid for new homes are so much higher. In the early 1990s the average home cost three times the average household income. Today, that multiple is closer to 8 times the average household income. So even though the interest rates peaked at a cash rate of 17.5%, the impact on the household budget was similar then to now.
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