Source: Money Mag —
Property prices may have started to retreat from their recent highs, but there’s no denying that purchasing a home has become a more and more expensive undertaking in recent years.
In fact, since June 2020, the average Australian mortgage has jumped by roughly 25% to over $600,000 according to figures from the Australian Bureau of Statistics.
Until recently, historically low interest rates have helped keep mortgage repayments manageable for most borrowers though – even those with sizeable loans. But that’s starting to change thanks to four consecutive cash rate hikes which have quickly flowed through to home loan rates.
As a result, prospective homeowners are now facing both relatively high property prices and rising interest rates, which prompts the question: how much should you be paying on your mortgage?
Ultimately there’s no hard and fast rule, so it’s going to come down to what you can afford and what your lender assesses that you can pay. Having said that, here are some indicators worth keeping in mind.
The 30% rule and mortgage stress
One of the more common numbers that crops up in the conversation around mortgage costs is 30% – that is, your housing expenses (whether that’s rent, mortgage repayments or other related costs) shouldn’t exceed 30% of your household income.
Following that idea, if your household income was $7500 each month you would want to ensure that your monthly mortgage repayments were no more than $2250.
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