Interest rate risk to mortgage load: APRA

Melissa Jenkins
(Australian Associated Press)

 

Many Aussies will have to fork out half of their incomes to cover their mortgages if interest rates return to average levels, the banking regulator has warned.

The head of financial industry regulator APRA, Wayne Byres, is worried about the ballooning size of home loans despite moves to impose limits on investor and interest-only mortgages.

There has only been a slight reduction in the proportion of borrowers being granted loans six times larger than their income – a level at which they would spend about half their net income on repayments if interest rates returned to their long-term average of about seven per cent, he said.

That degree of leverage is far higher in Australia compared with markets such as the UK and Ireland.

“Household indebtedness is high: perhaps more importantly, the trajectory is clearly for it to rise further,” Mr Byres told the Australian Securitisation Forum in Sydney on Tuesday.

The average price of an Australian house is more than $700,000, according to property data firm CoreLogic.

An average Sydney house will set you back more than $950,000, while Hobart remains the most affordable market the average house worth around $400,000.

On the auction front, the seven days to Sunday was the third busiest week this year but more than one third of homes that went under the hammer didn’t sell.

The preliminary national clearance rate was 65.4 per cent, but the final result is likely to be lower when it is released on Thursday – a reading that, if it eventuates, would mark five consecutive weeks of a rate below 65 per cent.

Sydney, where the final clearance rate has remained below 60 per cent since the last week of October, is the main market driving the national clearance rate down.

Melbourne’s auction clearance rate has also slipped under 70 per cent for the second week in a row.


CAPITAL CITY PRIVATE TREATY MEDIAN PRICES

HOUSES

Sydney – $952,000

Melbourne – $755,000

Canberra – $645,000

Brisbane – $529,000

Darwin – $503,000

Perth – $500,000

Adelaide – $435,000

Hobart – $400,000

Combined capitals – $708,693


UNITS

Sydney – $720,000

Melbourne – $550,000

Canberra – $419,000

Perth – $410,000

Brisbane – $392,125

Darwin – $375,000

Hobart – $350,000

Adelaide – $338,000

Combined capitals – $581,707

Source: CoreLogic Property Market Indicator Summary week ending November 19, 2017.

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