By Kate Burke
Homebuyers are facing a double whammy of rising interest rates and rebounding property prices that have sent mortgage repayments soaring, jumping by more than two thirds in dozens of Sydney suburbs since last year.
Monthly repayments on the median-priced Sydney house are about $2500 higher than in April 2022, before the rate hikes began, and repayments have jumped by at least $5000 in one in eight suburbs analysed.
Homebuyers need to show they can afford huge jumps in mortgage repayments, which have lifted by thousands of dollars a month in some suburbs. Credit: Nikki Short
Sydney buyers purchasing at the city’s median house value, about $1,397,000 last month, have seen initial repayments jump 57.5 per cent to about $6800 per month, CoreLogic modelling shows, compared to if they had managed to buy the same house in April 2022. That’s despite the median value being marginally lower now.
A buyer purchasing a median Sydney unit valued at about $832,200 – about $7000 higher than pre rate rise – is facing monthly repayments of about $4099, a 59 per cent increase. The figures assume a 20 per cent deposit.
Affluent Bellevue Hill recorded the biggest jump, as monthly repayments lifted more than $22,000 or 88 per cent, to about $48,000. Repayments also lifted more than $10,000 in Vaucluse, Dover Heights, Rose Bay and Double Bay, although in practice some buyers here might pay cash.
But some of the largest increases in percentage terms were in more affordable suburbs like Hurlstone Park, Cabramatta West and Canterbury, which were among dozens of suburbs where repayments increased more than two thirds.
Even in Sydney’s most-affordable suburbs, buyers need to be able to cop an increase of more than $1100 per month in monthly repayments, and upwards of about $600 more for units.
CoreLogic’s head of residential research Australia Eliza Owen said buyers across all price points had been affected by reduced borrowing capacity and rising repayments, but that lower income earners were the hardest hit and had been pulling back from the market.
“This is a market for wealthier buyers. The mortgage that people on a median income would typically afford … is getting further and further from what the market costs,” she said.
Owen said the strong price rebound and limited decline in the average loan size, despite reduced borrowing capacity, suggested those participating in the market had higher incomes and were less reliant on credit.
Westpac senior economist Matthew Hassan said buyers, particularly first timers, faced an extremely tough market, exacerbated by the broader housing supply shortage, which was driving up rents and making it harder to save for a home. Meanwhile, those who purchased in recent years, were more likely to be exposed to mortgage stress.
“When affordability is this stretched the buyers that are active are the wealthier ones,” Hassan said.
“If you’re more leveraged [or going to be] more leveraged relative to your income, then the squeeze is a lot harder … and it’s not just the interest rate rises ... it is as much about the wider cost-of-living increases.”
While prices had been rebounding, it was off the back of fewer transactions, which were being fuelled by buyers with other forms of financial support, like upgraders with equity, cashed-up downsizers, or first home buyers with help from family or government.
Hassan thought price growth would slow as affordability worsened, but said the undersupply of housing would continue to push prices higher.
First homeowners Haydn Sumiran and Emily Best are among those who borrowed close to their maximum to buy during the market boom.
“It was tough at the time,” Sumiran said. “Everything that we saw advertised that looked within our limit ended up selling for way more … so we were lucky to finally get one we liked that was in our approved budget.”
Haydn Sumiran and Emily Best are facing a sharp jump in monthly mortgage repayments, after rolling off their fixed rate term this month.Credit: Wolter Peeters
Three years and 13 rate rises later, the northern beaches unit owners face an almost $1500 increase in their monthly repayments after rolling off their fixed-rate last week, and that’s after refinancing to a lower rate with help from Equilibria Finance.
On top of refinancing, the couple have been cutting back on expenses, cancelling streaming services, dining out less and switching health insurance.
They feel lucky to have purchased when they did as their borrowing power would have reduced since.
Mortgage broker Anthony Landahl of Equilibria Finance said borrowing power had dropped 30 to 40 per cent for most clients, while prices had been rebounding.
“For buyers who may have been looking for 12 or 18 months they’ve been particularly impacted because with every rate rise their capacity to borrow has been [falling],” he said.
Meanwhile, those who purchased while rates were low had now pushed beyond the repayment levels they were stress tested for. This was particularly hurting those who borrowed between about $500,000 and $1.5 million, and borrowed to their maximum capacity.