More first-time buyers facing mortgage stress

Two months have been shaved off the time it takes a couple to buy an entry-priced house and one month for units compared with this time in 2023.

The research from real estate platform Domain and digital lender Unloan found higher interest rates on savings accounts and wages growth had slightly shortened the time needed to squirrel away a 20 per cent deposit.

Assuming those standard dual income earners aged between 25 and 34 were able to save one-fifth of their post-tax income, these improved saving conditions were enough to offset prices marching higher for both houses and units.

Domain chief of research and economics Nicola Powell said there were still major challenges facing first home buyers, including the ongoing cost of living crisis making it hard to save a lump sum.

"While there has been a slight decrease in the time required to save compared to the previous year, it's important to note the nuances involved," she said.

"This decrease primarily applies to Australians who can save a consistent amount ongoingly and have experienced wage growth, as these factors are key drivers."

It also still takes a long time to save enough for a deposit.

All capital cities combined, it takes five years and one month to buy a house and three years and seven months for a unit.

In Sydney, it takes six years and eight months to save up to buy a house.

The combined regions are more affordable, however, taking three years and nine months to save for an entry-priced house.

Yet once buyers get their foothold in the market, higher interest rates and rising property prices mean they are more likely to end up in mortgage stress.

This is when servicing a home loan absorbs more than 30 per cent of household income.

The average couple is now putting 42.2 per cent of their total income towards mortgage repayments on an entry-priced home and 28.8 per cent on a unit.

The mortgage stress threshold is crossed in Sydney, Canberra, Melbourne, Brisbane, Adelaide, Hobart and Perth, with Darwin falling just shy of the cut-off.

"The stretched mortgage serviceability highlights the dual effect of high cash rates on first-home buyers," Dr Powell said.

"While there has been a slight reduction in the time required to save a deposit, the higher interest rates are also making home loan repayments more difficult, which is why more people are facing mortgage stress."

Australian Associated Press