According to Ung, the avalanche of people paying higher mortgage rates mean that across all Australian households, total repayments will hit an all-time high of 10.5 per cent of disposable income by the end of the year.
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The RBA’s most recent figures show Australian borrowers repaid a record $28 billion to their banks in the final three months of 2023. They were charged $17.1 billion in interest on their loans.
While overall borrowing rates have climbed, Ung also found the discounts offered by banks to woo new customers have disappeared.
At the start of 2023, borrowers were offered variable lending rates around 0.35 percentage points lower than the benchmark standard variable. On a $600,000 mortgage, such a discount would be worth almost $130 a month in lower repayments.
But the average discount has now almost evaporated and stands at less than 0.1 of a percentage point or $30 a month.
The sharp increase in mortgage repayments plus a surge in asking rents has forced federal and state governments to ramp up efforts to ease pressures across the entire property sector by looking at ways to boost the supply of both rental and owner-occupier homes.
The federal government, which has set a target of 1.2 million new homes by mid-2029, has introduced a range of policies including assistance for local councils to plan and release land for development.
There are already doubts the target will be met. Residential building starts are around their lowest level since 2012 with some analysts suggesting the government, on current trends, will end 200,000 homes short of its target.
But ANZ chief economist Richard Yetsenga said just lifting supply may not help deal with affordability issues which have also plagued the housing sector.
He said with price pressures for construction workers and building supplies already growing, lifting demand for new homes could exacerbate the situation.
ANZ chief economist Richard Yetsenga says simply increasing supply may not deal with all of Australia’s housing issues.
“Responding to these challenges with new supply, in the absence of pushing just as hard on other policies, is unlikely to materially improve affordability, even in the medium term,” he said.
Yetsenga said there were many problems across the entire property market that meant “simple” solutions like extra supply are unlikely to deliver widespread solutions.
He said with the country holding 11 million dwellings for 26 million people, the challenge for the property market may be more about a misallocation of housing rather than a genuine shortage of new homes.
This could force governments to look at other ways to shift demand for housing to those parts of the country where it is not in short supply.
“Pragmatic interventions to manage demand and limit the misallocation of housing may well hold more promise than supply alone,” he said.
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