Australians are being blindsided by hidden housing expenses that are quietly blowing out the real cost of owning a home to almost double the advertised price.
And experts warn it’s emerging as one of the most dangerous pressure points in the economy.
A new Finder.com.au analysis of state stamp duty, deposits, prices and the full interest bill paid over 30 years revealed the true cost of a home is even higher than most Aussies realise.
The hidden long-term costs are so inflated that a purchase at the median capital city price of about $1m using a 20 per cent deposit can cost close to $1.88m by the time the final repayment is made.
This figure would rise to just over $2m if the same buyer used a 10 per cent deposit – depending on the state and the level of government stamp duty charges.
And that’s before repairs, strata fees or a new hot-water system even enter the chat.
A typical house costing $1.62m will actually cost the buy closer to $3.2m. Picture: Sam Ruttyn
It’s even worse in Sydney, Australia’s most expensive capital, where a purchase at the city median house price of $1.62m using a 10 per cent deposit would actually cost nearly $3.3m over 30 years if no extra repayments were made.
Economists say the combination of record-low affordability, high interest rates and state governments’ inflated stamp duty charges are creating a trap for families.
Finder.com.au home loans expert Richard Whitten said the biggest blow to budgets is the interest charged over decades on what were already lofty purchase prices.
“Interest is a killer,” Mr Whitten said. “Australian property prices are so high that the interest most of up pay over 30 years now is astronomical.
“It suggests interest rates will have to be somewhat constrained in the future. If Australians are borrowing a million dollars to buy a house then a 7 or 8 per cent interest rate could ruin them.”
Someone borrowing $800,000 would have to fork out close to $1.67m in total interest over the life of their loan – assuming rates didn’t climb.
Layer in stamp duty that often adds tens of thousands on top, and Australians find themselves paying two homes’ worth of money for one roof.
The compounding costs are hitting at the worst possible time, as households wrestle with inflation, rising childcare fees and power bills that have turned the weekly shop into a strategic operation.
Mr Whitten said families may struggle to save if they take on a larger mortgage without realising the total cost.
“It’s much harder to build wealth outside your home when all your money is going to mortgage repayments,” he said.
Buyers are often pressured at auctions to pay more, resulting in larger, riskier debts. Picture: Sam Ruttyn
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“Not factoring in all the costs of home ownership will definitely see some borrowers overstretch themselves.
“They could end up moving in and starting with no savings left, which is tough if you need to pay an unexpected bill. Rate rises can catch these borrowers by surprise and really hurt too.”
WARNING OVER FIRST-HOME BUYER SCHEME
Included in the analysis was a warning about the real cost of buying through the newly expanded First Home Guarantee Scheme, which supports first-home buyers using deposits as low as 5 per cent.
The higher debt burden of borrowing 95 per cent of the purchase price through the scheme can add up to $244,000 in extra repayments over the life of a loan due to taking on larger debts.
In October, the policy was widened by scrapping income caps and lifting price caps to $900,000 in Melbourne, $1m in Brisbane and $1.5m in Sydney.
The scheme allows buyers to use smaller deposits without having to pay pricey lender’s mortgage insurance, but the bigger loans would outweigh the insurance savings.
Finder found Sydney unit buyers would pay an average of about $131,000 more, Brisbane buyers $113,000 more, and Melbourne buyers $98,000 more over 30 years.
The lenders’ insurance on these purchases would have been $30,000-$60,000, according to online calculators.
Mr Whitten said the extra costs were down to the difference between borrowing 80 per cent of the value versus 95 per cent.
IMPACT ON INTEREST RATES
Ray White chief economist Nerida Conisbee said the real costs of buying a home suggested the economy was far more vulnerable to rate changes than in the past.
The RBA would be playing with fire if it were to repeat its 2022-2023 run of 13 successive interest rate hikes as it could potentially strangle the whole economy, she said.
“It doesn’t take much of an increase any more to completely slow things down,” she said, adding that high debt levels were a result of banks pushing households to borrow more.
“Banks are pushing for people to take on longer debt,” Ms Conisbee said. “If you look at the average length of a home loan, the standard used to be 25 years. Now it’s 30 and some banks are offering 40.
“The finance products offered by banks enable (home buyers) to borrow more by encouraging people to take on debt for longer.”
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Finder.com.au Home Loans expert Richard Whitten said housing costs were much higher than most realised.
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It comes as economists warn interest rate rises are no longer a distant possibility and may even be back on the table late next year as a result of soaring energy costs reigniting inflation.
My Housing Market economist Andrew Wilson said there may be an argument for the Reserve Bank to “take back” one of this year’s cuts if energy prices continue to rise over 2026.
VanEck head of investment and capital markets Russel Chesler said earlier this month there was a “possibility” that “the next move could be a rate increase if inflation doesn’t change course”.
CBA too has winded back its previous forecasts for additional rate cuts, declaring the current rate cutting cycle finished, with no cuts likely next year.
The other big four banks still forecast a cut early next year.
HOUSEHOLDS AT A TIPPING POINT
Mortgage stress is now so widespread it’s becoming the norm rather than the warning sign.
Recent Digital Finance Analytics data revealed nearly half of mortgaged households in NSW, Queensland and WA were in spending an unsustainable amount of their incomes on repayments each month.
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Some lenders, such as CBA, have forecast that RBA Governor Michele Bullock will not be announcing any more rate cuts next year. Picture: Nikki Short
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Digital Finance Analytics data scientist Martin North said household incomes had not caught up with prices.
“Higher home prices have led to bigger mortgages, with debt growing much faster than incomes,” he said, explaining the result was households hunkering down, leading to lower economic activity.
Mr North added that if more families are diverting a massive chunk of income into servicing oversized mortgages, consumer spending will take a hammering, dragging confidence and growth down with it.
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