(Feb 26): Most major Australian cities are reporting mortgage stress among first-time home buyers due to still-elevated interest rates and ultra-high prices, according to property consultancy Domain Holdings Australia Ltd. 

In 2019, only Sydney and Melbourne recorded mortgage stress — when repayments exceed more than 30% of household income — for entry-priced houses. Now, all major cities bar remote Darwin are affected, Domain said in a report released on Wednesday. For units, no city experienced mortgage stress in 2019, whereas now Sydney, Brisbane and Adelaide have crossed that threshold.

Households in major cities are now spending more than 47% of their income on repayments for entry-level houses, according to the report. In Sydney, which is one of the least affordable markets in the world, that figure climbs to 57.6%.

“This trend shows how rising interest rates and property prices have compounded, pushing households into larger mortgage repayments,” said Nicola Powell, Domain’s chief of research and economics. “Ongoing challenges like housing undersupply remain, making it crucial to ensure adequate, affordable, and sustainable housing into the future.”

Powell said aggressive rate hikes through 2022-23 “took a huge toll on mortgage serviceability,” though a recent easing in prices and the first rate cut in four years “points to gradual relief.”

The Reserve Bank last week reduced its benchmark rate to 4.1%, but signalled caution over further easing. Meantime, accommodation has become a key political issue with an election due by May 17 and polls showing cost-of-living concerns and housing among the top three issues. 

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