Easing price growth is on the horizon – however, unaffordability remains. Image – Canva.
  • National home loan affordability has fallen 15.6%
  • Home loan approvals dropped by 2,934 between August and September quarters
  • Affordability across the country declined by 1% compared to the August quarter results

National home loan affordability has fallen 15.6% as a result of booming house prices increasing the average loan size required for buyers, according to Bluestone’s Home Loan Affordability Index for September.

Home Loan Affordability Index Quarter Change Sep 2021 

Source: Bluestone Home Loans

Affordability across the country declined by 1% compared to the August quarter results, and higher than the 0.8% decline reported over the previous quarter.

The index increased to 91.76 in the September quarter, up from 90.80 in the August quarter and above the long-term average of 86.90.

Bluestone Home Loans consultant economist Dr Andrew Wilson said the higher the house price index, the more likely house price growth will ease, and the number of home loans approved will fall.

“We’re already starting to see this with 84,998 loans approved in the September quarter, down from 87,932 in the August quarter.”

The index has now risen above the long-term average of 86.9 over four consecutive rolling quarters and continues to track higher than the previous above-average results recorded in 2016.

Home Loan Affordability Index Sep Quarter 2021

Source: Bluestone Home Loans

Dr Wilson said, “Recent strong house price growth has resulted in buyers having to borrow more and, with subdued wages growth and flat interest rates, this has resulted in a higher proportion of incomes required for loan repayments.

“Stricter lending conditions from financial institutions also place a ceiling on borrowing capacity for buyers which results in reduced demand and lower prices growth.”

Dr Wilson is a leading independent property market economist. Image – Twitter

The index found New South Wales and Victoria continue to record the steepest falls in home loan affordability with annual declines now of 20.6% and 17.4% respectively reflecting recent sharp house price growth in Sydney and Melbourne.

In comparison, home loan affordability in the ACT improved in the September quarter by 1.1%.

New South Wales remains the clear state leader in home loan relative unaffordability, 27.1% higher than the national result measured as a 100 base over the September quarter.

Dr Wilson said, “With national home loan activity set to revive as lockdown restrictions end in Sydney and Melbourne, rising house prices and flat incomes will continue to reduce affordability and sideline home buyers.”

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