Australia’s mortgage burden is now above 1989 levels – when interest rates were 17%
Summary
New research shows Australian households now spend a larger share of their income on mortgages than they did in the late 1980s when interest rates were at 17%. Despite current mortgage rates being about half that high, rising home prices have led to higher borrowing, making mortgage payments a greater financial burden today.Key Facts
- Mortgage interest rates hit 17% around 1989-1990, with households spending about 5.7% of their income on interest payments then.
- In early 2026, mortgage rates averaged 8.3%, yet households spent around 5% of income on mortgages alone and 5.4% when including other consumer debt.
- Total debt payments as a share of income could reach nearly 6% after recent interest rate increases.
- Home prices have increased so much that people need to borrow more, despite fewer people owning homes today.
- Though mortgage rates are lower now than in the 1980s, current conditions cause more financial stress for borrowers.
- Economic factors like rising living costs and tax changes have caused home prices in cities like Sydney and Melbourne to drop recently.
- Experts say these price falls are normal and short-lived, often followed by rapid growth in home prices.
- Housing affordability is currently at its worst level on record since 1994, making it harder to buy a home than in the late 1980s.
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