Commonwealth Bank detail reveals stark ‘divide’ as Aussie mortgage mogul calls for change
The household income of those taking out mortgages shows just how hard it is for many. (Source: Supplied/Getty)
Getting a mortgage is increasingly becoming a rich person’s game in Australia. Despite government policies to help lower-income buyers into the market, home loans are overwhelmingly going to the top end of town.
In many cases, those who aren’t earning an elite income can only rely on government schemes or the bank of mum and dad. And with Australia’s ongoing levels of high immigration pushing up demand, that won’t change any time soon, says industry insider Mark Bouris.
“Lower-income buyers aren’t gone, but many are buying further out, buying smaller, or relying on family help or government schemes to get over the line,” he told Yahoo Finance.
While there’s no simple fix, he says the government and the country “need to be honest” about immigration if a more palatable level of affordability is ever going to return to major metropolitan markets.
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As the founder of Wizard Home Loans and current chairman of Yellow Brick Road, Bouris has extensive experience in the non-bank mortgage lending space and understands how important wealthy parents have become in the market.
“It does create a divide between families who can help and families who can’t.”
But overall, the current data on home loans shows it “has become much more income-driven,” he said.
The latest results from the nation’s biggest mortgage lender, Commonwealth Bank, show nearly half of home loans going to households earning greater than $200,000, while households bringing in more than $500,000 accounted for about 20 per cent of owner occupier loans (and 30 per cent for investors) in dollar terms.
“When most new loans are going to households earning more than $200,000, and a big chunk above $500,000, it shows how important strong incomes have become,” Bouris said.
According to the latest data from the Australian Bureau of Statistics, the median gross annual household income in Australia was approximately $92,856 in the year 2022-23. While that has undoubtedly risen in the past two years, that level of income makes up a fraction of mortgage borrowers.
“Higher interest rates and tougher lending rules mean banks look very closely at what you earn and what you spend. In expensive cities, two solid incomes are often what make the numbers work,” Bouris said.
The latest ABS data puts the median household income below $100,000. (Source: CBA)
While a good deal for young Aussies keen to get our of the rental market, Bouris cautioned those using another federal government program to purchase with just a 5 per cent deposit, will pay more to the bank over the life of the loan.
“Yes, you get into the market faster, but you may pay more across the life of the loan because you’re starting with a bigger debt.
“You have very little buffer if prices fall,” he added. “Stress-test your repayments. Keep a separate emergency fund. Don’t borrow right to the maximum the bank offers.”
The Aussie businessman warned a number of factors, including the cost of materials, was adding to high prices but said there’s one key element on the supply side that is in our control.
“If we’re serious about affordability, we need to be honest about supply and demand,” Bouris told Yahoo Finance.
“Australia has had very strong migration at a time when the construction industry is already stretched. Builders are struggling with costs and capacity. When the population grows faster than we can build homes, prices go up, it’s that simple.”
While also pointing to the need for other measures including reducing red tape and ensuring long-term infrastructure planning to make it more viable for people to live in regional areas, Bouris said the only short term silver bullet is reducing new entrants into the country.
“The quickest lever available right now is to reduce migration to more sustainable levels, while still bringing in the key skills we genuinely need.
“There’s no single fix. But if construction is already at capacity, easing migration in the short term is the fastest way to relieve pressure while longer-term supply reforms take effect.”
Australia is falling below its target of building more than a million new homes. (Source: AAP)
While prime minister Anthony Albanese on the weekend dismissed the need to crackdown on immigration, it’s been a long simmering issue. Writing for Yahoo Financenearly a year ago, Bouris said lower income Aussies were being badly squeezed by the current situation.
“Record-high immigration has pushed rents and house prices sky-high. This has left many young Australians and low-income families in the lurch,” he said.
New Opposition Leader Angus Taylor this month indicated migration will be a key focus for the federal Liberal Party.
