Borrowing power plunges faster than house prices as rate rises crush buyers

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Five interest rate rises have slashed more than $100,000 from a typical couple’s borrowing capacity, making it harder to buy ... Read More The post Borrowing power plunges faster…

Reduced borrowing capacity means it is no easier to enter the property market today than at the start of the year, despite prices falling. Pic: Getty Images

It is harder to buy a home today than at the start of the year, with buyers’ loan finance approvals falling faster than property prices.

Despite the Albanese government arguing that falling property prices were a win for affordability, five interest rate rises since February have wiped more than $100,000 from the typical Australian couple’s home loan budget.

In contrast, capital city prices have fallen 8.1% since the market peaked in March at a median price of $1.038m, reflecting a drop of $83,131.

Chief executive of mortgage brokerage Lendi and Aussie Home Loans Sebastian Watkins said no “clear winner” had emerged in the current market, despite Labor’s decision to remove negative gearing and boost capital gains tax, with first-home buyers’ budgets shrinking.

“If we look at first-home buyers, they’ve been watching these price falls thinking this is finally their time to get in,” Watkins said. “But now the banks have cut their budgets because serviceability is through the roof; many of them can’t even borrow the loan anymore.

“And when they are able to get in, every dollar that they’re borrowing now costs them infinitely more. So, first-home buyers aren’t clear winners here.

“If you’re an existing homeowner with a mortgage, well then you’ve been given the double punch. Your house, which is probably the most valuable asset you own, has just seen, in most cases, a significant decline in the equity value, and your mortgage, which is probably the biggest bill you’re paying every month, has just gone through the roof.

A couple each earning the median wage of $90,500 a year with a 20% deposit taking out a new loan over 30 years has had their borrowing power reduced by 10.6% since January, from $974,836 to $871,859 over the span of 11 months, according to Aussie.

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