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Discussion paper

Generation stressed: house prices and the cost of living in the 21st Century

Mortgages Affordable housing Cost and standard of living Housing prices Economic modelling Household finance Australia

In this discussion paper, the author estimates the total cost of a mortgage as a proportion of wages over the 30-year life of a standard home loan. To do this, he compares home prices, mortgage rates, and wage changes to see what proportion of a median income would go to covering the cost of the median mortgage.

The results reveal a significant increase in the lifetime expenditure on the median mortgage over three decades, and a consequent reduction in the spending capacity of average Australian households.

  • For a Silent Generation family buying in 1970, the average repayment cost over the course of the mortgage was 11.2% of their gross income.
  • For a Baby Boomer family buying a home in 1985, the average repayment cost over the life of the mortgage came out at 19.5% of gross income.
  • For a Generation X family though, who bought in 2000 and have approximately nine years left to go on their mortgage, we estimate they will spend 25.5% of their gross income on servicing mortgage debt.
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