Invest
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed.

Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed.

While much of the focus has been on Australia’s rising house prices post-COVID-19 pandemic, the cost of housing began to increase well before that.
Paired with slow wage growth, it is now costing the typical Aussie a much larger percentage of their weekly income to service a loan, new research by Per Capita has revealed.
According to the figures, for a Silent Generation family buying in 1970, the average repayment cost over the course of the mortgage was 11.2 per cent of their gross income.
Fast forward to the Baby Boomers, and the average repayment cost over the life of the mortgage climbed to 19.5 per cent of the gross income of a family that purchased a home in 1985.
For a Generation X family that cashed out on a home in 2000 and have approximately nine years left to go on their mortgage, Per Capita estimated they would end up spending 25.5 per cent of their gross income on servicing their mortgage debt.
The research reveals that the household debt of the Silent Generation family was worth around 3.7 years of median full-time male annual earnings in the first year of the mortgage, but after five years over half of the debt had been inflated away to just 1.8 times annual earnings.
Thirty years later, the initial mortgage debt taken on by the Generation X family equated to 5.6 times annual earnings, and was still at 4.1 times after five years.
However, according to Per Capita, Gen X family is paying $1,425 per month to service their mortgage.
If they were on the same payment trajectory as the Boomer family, their family bill would sit at $910, or if they were on equal terms with the Silent Generation, they would be paying $440 a month.
Report author Matt Lloyd-Cape said “for the individual family, this is a huge loss of income – almost $1,000 a month – that would be better directed toward education, health or other living expenses.”
He highlighted that high mortgage servicing costs are hurting the overall economy.
“For the nation, it represents a significant constraint on household consumption, which accounts for more than half of Australia’s economic activity.”
The discussion paper argued that the consumer price index, by treating the largest cost most families will ever assume – that of buying a home – as an asset investment rather than as a daily expense, fails to adequately account for the increase in the cost of living for mortgagee households over the last 50 years.
“Given that Australia’s social welfare model is predicated on mass home ownership, factoring the total cost of a home purchase must be incorporated into cost of living measures,” said Mr Lloyd-Cape.
“We hope that this paper will contribute to a renewed focus on how low inflation and wage growth are contributing to intergenerational inequality, in this instance through the housing market,” Mr Lloyd-Cape concluded.
About the author

About the author


Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more

Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more

Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more

Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more

Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more

Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more

Property
HSBC forecasts 2023 house price decline of up to 10%
The firm had previously predicted a modest rise for house prices next year. ...Read more

Property
Perth house prices continue climbing to a record high
While growth may have come to an end in Sydney and Melbourne, Perth house prices are still on the rise. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more

Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more

Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more

Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more

Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more

Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more

Property
HSBC forecasts 2023 house price decline of up to 10%
The firm had previously predicted a modest rise for house prices next year. ...Read more

Property
Perth house prices continue climbing to a record high
While growth may have come to an end in Sydney and Melbourne, Perth house prices are still on the rise. ...Read more