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More brokers are stepping up their support to borrowers after new data shows that mortgage repayments consume more than half of the average family income.
Housing affordability has reached its lowest point since monitoring began in 1996, according to the Real Estate Institute of Australia (REIA), but brokers are helping ease the burden by supporting more clients.
The latest Housing Affordability Report from the REIA revealed that, over the three months ended December 2024, affordability declined for the third consecutive quarter, with mortgage repayments consuming 50.1 per cent of the median family income.
Housing affordability dropped across all states and territories, with the steepest drop recorded in Western Australia (down 2.5 percentage points) and the smallest decline in Victoria (down 0.6 percentage points), where property prices have been cooling.
Rising property prices have been the main driver of reduced affordability, the REIA noted, with larger mortgages needed to buy a home.
Despite persisting affordability issues, the number of first home buyers increased by 5.5 per cent over the December quarter to 31,036, though the figure remains 1.3 per cent lower than the previous year.
The average loan size for first home buyers rose by 1.2 per cent to $542,644.
Interest rates remained stable over that period, with the standard variable rate averaging 8.8 per cent and the three-year fixed rate decreasing slightly to 6.1 per cent.
The national median weekly family income saw a modest 0.9 per cent increase over the quarter and a 3.7 per cent rise over the past 12 months, reaching $2,528.
Looking ahead, the REIA reflected that the start of a likely rate-easing cycle should improve housing affordability this year.
Historically, each 0.25 per cent rate cut has led to a 1 percentage point decrease in the proportion of income required to service a mortgage, the REIA stated.
However, uncertainty around the timing and size of rate cuts amid a seemingly cautious approach by the Reserve Bank of Australia (RBA) could limit housing affordability improvements in 2025.
How brokers are easing affordability issues
Cameron Inman, a mortgage broker and branch principal at Yellow Brick Road, told The Adviser that financial planning and setting buyer expectations were crucial in helping first home buyers navigate affordability problems.
“The greatest assistance we offer is going through a budget with some of our clients. Showing them where their money is actually being spent, and work[ing] with them to help change some of those habits to help them better save up for their first property,” Inman said.
“Coupled with this is helping clients realise expectations of what their first home is. It’s not their forever home; it’s the home to get them into the market.”
“Sometimes, helping them temper their ideas allows them to actually purchase a house to get them into the market, then build strategies with them to help pay this off quicker and help them move into another house or even an investment property in the coming years.”
Eventus Financial mortgage broker Alex Veljancevski has extensive experience working with first home buyers and believes lower interest rates will provide some relief for them, increasing their borrowing power and potentially giving buyers access to a wider range of properties.
However, Veljancevski cautioned that a rate cut won’t solve all the hurdles first home buyers face.
He noted that lower rates could push prices even higher, as more buyers with increased borrowing power compete for limited stock.
Veljancevski added: “There are strict lending criteria, which means that, even with cheaper loans, you typically need a sufficient deposit, a good credit history and the ability to meet monthly repayment obligations.
“Even with a rate cut, these factors remain key barriers to entry.”
To navigate affordability challenges, Veljancevski encouraged first home buyers to set a clear budget, obtain pre-approval from a lender and consider alternatives like rentvesting or the use of government initiatives like the Home Guarantee Scheme.
Sydney-based Loan Market Capital finance broker Jason Wylie told The Adviser that as affordability has worsened, he has noticed clients consider different options.
“I’ve had a lot of clients deciding to invest instead of purchasing an owner-occupied [property] due to the borrowing capacity not getting them far enough,” he said.
“This is more likely for single applicants as one income needs to be high for a first home buyer to purchase an owner-occupied [property] in Sydney.”
“Guarantors and gifts from parents are becoming a lot more popular as well.”
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