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Aussies now need to make $180k to borrow $500,000

A composite image of a home in an Australian suburbs with a for sale sign out the front and Australian currency to represent the cost of a home loan.
Home loan repayments are so high Aussies need to be earning well above the average wage to afford a home. (Source: AAP/Getty)

Aussies with a home loan were hit with the eighth Reserve Bank (RBA) rate hike yesterday, and the Big Four banks have passed on the hike to customers.

This means mortgage holders will see their monthly repayments rise yet again, with some now forking out thousands of dollars more per month on top of the repayments they were already making.

Finder head of consumer research Graham Cooke said the consecutive hikes now means that for someone to even afford a relatively small loan their income needs to be well above the average to afford repayments.

“Aussies with a $500,000 mortgage will be paying almost $900 more per month compared to what they were paying in April,” Cooke said.

“To comfortably afford this you’d need to be earning a minimum income of just over $180,000 – significantly more than the average salary.”

To put this in perspective, the average Australian income is just $52,338 according to the Australian Bureau of Statistics (ABS).

This means that even in a double-income household, if both parties earn the same amount they still would not be able to afford repayments on a $500,000 loan.

Even more shocking, if the RBA were to hike rates to 4 per cent - which some experts predict will be the peak - the income needed to afford repayments on a $500,000 loan would jump to $203,358.

The Aussies living payday to payday

This comes as Aussies are already struggling to keep up with the rising cost of living with 2 in 5 (44 per cent) Aussies running out of money between paydays, according to a Finder survey of 1,054 respondents.

Cooke said Aussies were having to devote a bigger share of their budgets to essential living expenses.

“The current series of rake hikes has added almost $11,000 to the annual cost of a $500,000 mortgage – a huge amount of extra money for mortgage holders to fork out,” Cooke said.

“Renters are also doing it tough; vacancy levels are at record lows and the latest Rental Affordability Index shows all capital cities saw a drop in affordability in this year.

“Between what Aussies earn and what they spend – for many there’s nothing left over at the end of the month.”

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