Warrnambool mortgage repayments jump 140 per cent since 2020, crippling affordability

The Standard crunched the numbers using the latest publicly available property asking price and interest rate data, revealing the average mortgage repayment had jumped more than $2000 in three years, from $1445 in August 2020 to $3480 today, which would put the average household in severe mortgage stress.

The figures reinforced a September 2 report from real estate market analysts PropTrack showing housing affordability hitting its lowest level in three decades, with Victoria the third toughest state to buy a house after NSW and Tasmania.

Affordability in Warrnambool has been smashed by a combination of rising house prices and interest rates spiking after reaching historic lows in 2021.

The average asking price for a home in Warrnambool in August 2020 was $411,615 according to data from investment research company SQM Research. With a 10 per cent deposit of $41,162, and further savings to cover stamp duty and other fixed costs, a home buyer would have been asking the bank for a loan of $370,453.

At that time it was common to find owner-occupier principal-and-interest variable rate home loans at 2.4 per cent interest, which would make the repayments on a $370,453 loan $1445 per month.

By August 2021 the COVID-19 tree change had started to take hold, sending the average asking price for houses in Warrnambool to $559,810. In the same period interest rates had dropped even further, to roughly 2.2 per cent for an owner-occupier variable rate mortgage.

With a 10 per cent deposit a home buyer would need a loan of $503,829, making monthly repayments $1914, a jump of nearly $500 per month from the previous year.

In late 2021 and throughout 2022 inflation became a problem, forcing the Reserve Bank of Australia to start raising rates and forcing lenders to increase their home loan rates. By August 2022 owner-occupier variable rate loans had jumped to around 5 per cent, while Warrnambool asking prices had also risen further to $599,046.

A home buyer with a 10 per cent deposit would need a loan of $539,141, but suddenly the repayments on that loan would be $2895 per month, a jump of nearly $1000 since the previous August.

In the past year property asking prices have tipped higher still, before flattening out in recent months, but interest rates have kept rising.

A decent rate for an owner-occupier variable loan is now a touch over 6.2 per cent and the average asking price for a Warrnambool house is $628,638. That would leave a home buyer with a 10 per cent deposit needing a $565,774 loan, which would bring repayments of $3480 per month, a further $600 rise from the 12 months ago.

The Standard reported on September 3 that more than 12,000 households across the south-west were facing economic distress, including 4100 in Warrnambool, and rising housing costs are undoubtedly contributing to the issue.

Warrnambool's average monthly household income was $6153 according to the 2021 Census, with Australian Bureau of Statistics data suggesting it has changed only a few percentage points since then.

In August 2020 a Warrnambool home buyer spending $1445 on mortgage repayments would have been spending 23 per cent of the average household income. Most banks consider a household to be in mortgage stress if it is spending more than 30 per cent of its monthly income to repay the mortgage.

In August 2021 the average Warrnambool home buyer, spending $1914 to make monthly payments, would have been spending 31 per cent of the average household income on the mortgage. By August 2022, spending $2895 on the average mortgage, they would have been spending 47 per cent of the average household income on the home loan.

In August 2023, even allowing for a generous 6 per cent rise in household income, the average Warrnambool home buyer would be spending more than 53 per cent of the average household income on mortgage repayments.

The PropTrack report said the average Victorian household would have to spend 35 per cent of its household income to afford a house in August 2023, suggesting housing affordability is considerably worse for Warrnambool locals than the statewide average.