New mortgage curbs could see thousands excluded

Do your clients make more than $200k a year? Here's why it matters

New mortgage curbs could see thousands excluded

As the cost of a Sydney home hits more than 12x the average wage, the pressure is on for politicians to find an answer for what many are calling unsustainable property price growth.

Yesterday, APRA’s new rules came into force; but there is no guarantee how much effect they will have on the market. With prices this high there is a growing dilemma for your clients – just where can they afford to buy?

Throw into the mix the fact that APRA chairman Wayne Byrnes has mentioned a figure of ‘six times’ a borrowers’ income when talking about affordability, and many economists are suggesting this figure might be a portent of future APRA regulations.

“I think that if the risk that we’ve seen in lending data in recent months continues, then we would probably see further interventions,” CoreLogic’s head of research Tim Lawless told the Sydney Morning Herald.

“Given that housing has been such a core component of the recovery from COVID, both in the real estate activity itself and the wealth effects, there may be more caution.”

The Sydney Morning Herald and The Age have crunched CoreLogic’s house price data using the six-times salary metric to find out just how much a mortgage borrower needs to earn in order to be able to buy into which suburbs – and the results are an eye opener.

More than 500 suburbs are out of reach for borrowers with a 20% deposit earning $100,000 or less in Sydney; 300 plus would be excluded in Melbourne.

For Melbourne, the top 5 suburbs would require an income of $430,000 or more

Suburb                 Salary required (median house price, 20% deposit)

Toorak                  $626,000

Brighton               $509,000

Deepdene           $466,000

Malvern               $440,000

For Sydney’s top suburbs? Your clients will need to be earning more than a cool $1million each year.

Suburb                 Salary required

Bellevue Hill       $1,066,000

Vaucluse              $1.059,000

Double Bay         $830,000

Rose Bay            $795,000

Bronte                  $720,000

And things aren’t going to be getting any easier. If multiples of salary are introduced at, say, six times, an uptick in interest rates will obviously make matters worse – and upticking they are.

A number of banks have recently raised mortgage rates, and interest rate derivatives are predicting a 50% chance of a May rate hike by the RBA from 0.15% to 0.25%.

This is yet another message for your clients – want to make sure that you aren’t shut out of the property market by a rule change? Get preapproved now.