Reserve Bank governor Michelle Bullock and the RBA’s decisions to raise interest rates are behind a horror new milestone in the nation’s affordability crisis.
Australian housing affordability has hit a terrifying new low, with the average home loan now so big it chews through more than half the nation’s median family income.
And the record hit to household finances has come despite homebuyers trying to pull back their spending, with latest finance figures showing the nation’s average loan size decreased by almost $1400 in the first three months of this year.
The Real Estate Institute of Australia’s latest Housing Affordability Report reveals there isn’t a single state or territory where the cost of paying the bank falls below the 30 per cent of income threshold for mortgage stress, and that it’s surged to a record 58.4 per cent in NSW.
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Queensland and South Australia were both also above 50 per cent, and Victoria and Western Australia not far behind at about 46 per cent.
And the figure has worsened in every corner of the country after two interest rate rises in the first three months of this year put a major squeeze on Aussie households, dragging the national figure up from 49.3 per cent at the end of 2025.
The Report indicates that the upshot, in dollar terms, is that for a $734,881 loan, the mortgage holder will be paying $5972 a month — up more than $600 from a year ago.
It doesn’t capture the impacts of a third rate hike in May.
At the same time a year ago the typical household would need 47.9 per cent of their income for the average home loan, while a decade back it was closer to 35 per cent of a family’s wages.
Nowhere in the country has had affordability improve.
Real Estate Institute of Australia president Jacob Caine said the Reserve Bank interest rate hikes had put the nation’s housing affordability in a tough position.
REIA president Jacob Caine said the unprecedented hit on homeowner finances was being led by Reserve Bank of Australia’s interest rate hikes.
“The RBA increased the cash rate twice during the quarter, and this has flowed directly through to borrowing costs, lifting mortgage repayments and reducing affordability,” Mr Caine said.
“Housing affordability is highly sensitive to interest rate movements, and the March quarter demonstrates just how quickly conditions can deteriorate when rates rise.
“Addressing affordability requires a sustained focus on increasing housing supply, alongside stable and predictable policy settings that support investment into housing.”
Real Estate Buyers Agents Association of Australia president Melinda Jennison said to have breached the 50 per cent margin was “concerning” and reflected that in many of the nation’s most expensive capitals, the home dream had become incredibly challenging for families.
“In some areas that dream of owning your own home is becoming much more difficult to achieve,” Ms Jennison said.
Buyers Agent Melinda Jennison has warned the Great Australian Dream is suffering.
It’s also likely those facing the worst of the rising mortgage costs are first-home buyers, with separate data from the Australian Bureau of Statistics reflected in the REIA report indicating that the 27,078 Australians who signed up for their first home in the opening three months of this year is a 4 per cent increase from the same time a year ago.
Nationwide, home prices were also still rising in the March quarter, up 2.2 per cent to a $1,146,864 average.
Additional ABS data showing the national average dropped $1377 to $734,881 in the first three months of the year.
It is, however, up a whopping $74,823 compared to the same time in 2025.
Ms Jennison noted that it was also possible a greater share of first-home buyers might be extending themselves further with the federal government’s expansion of its 5 per cent deposit scheme for them, which could be behind the average loan size rising significantly in the past year.
The nation’s highest home prices in Sydney have made it one of the most challenging parts of the country for typical Australians to buy into.
“And the concern for anyone that’s purchased with the 5 per cent deposit scheme is if they fall into a position of negative equity,” she said.
The professional homebuyer added that with the nation moving into “uncharted territory” with affordability stretched to the limit, the lack of certainty in where interest rates were headed next would be putting a lot of Australians under significant financial anxiety.
Despite this, she said buyers who had acted in the past three months should be fine to meet repayments as they would have been assessed with a 3 per cent buffer that would ensure they could continue paying their loan if the RBA continued to raise rates.
In the barest hint of a silver lining some of the nation’s renters saw a fractional improvement, with the share of average wages needed to make weekly payments in Victoria falling to 20.2 per cent, and also dropping to 25.8 per cent in the Northern Territory and 18.7 per cent in Canberra.
The proportion of income needed to for rent rose in every other state and territory, though only modestly in most, and across the nation was up 0.2 percentage points to 23.9 per cent.
But it was down slightly from 24.1 per cent a year ago.
Rents are somewhat stable for now, but there are concerns for their future.
Mr Caine said the apparent stability was not expected to last, with “clear concerns about the medium-term outlook”.
“Independent modelling indicates that the proposed tax reforms will reduce housing supply and push rents higher, adding further pressure to renters already facing cost-of-living challenges,” Mr Caine said.
He said the findings reinforce the need for a co-ordinated policy approach to improve housing affordability over the long term.
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