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Median home loan needs $100,000 income

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  • Median home loan needs $100,000 income

    Median home loan needs $100,000 income

    Jessica Irvine Economics Correspondent
    October 19, 2007

    First-home buyers now require a household income of more than $100,000 to qualify for a loan on the median-priced first home, a report from the Housing Industry Association and Commonwealth Bank has found.

    This is up steeply from $80,000 two years ago, due to rising home prices and interest rates.

    The figures showing housing affordability has plunged to another record low have reignited the election debate over who can best manage the "kitchen table" economy, in the face of rising cost-of-living pressures.

    The chief economist at the association, Harley Dale, said borrowers were finding their own solutions to the housing affordability crisis, teaming up with a partner to meet the $104,200 income threshold required by bank lenders.

    "You can imply from a figure of that size that clearly it has become considerably more difficult for lone-person households or single-income households to enter the home ownership market.

    "There [are] a lot of people out there striving to try and have a dual income and share in that dual income for as long as they can to get their savings levels up."

    A separate survey of household balance sheets also found families are plunging further into debt and finding it harder to save.

    The ING Direct-Melbourne Institute survey found household finances had "taken a battering", with just 46 per cent of families managing to save, compared to 54 per cent a year ago. The number running into debt also rose from 4 per cent to 7 per cent.

    "Higher interest rates, bigger mortgages, record levels of credit-card debt, larger grocery bills and the general rise in the cost of living are affecting our inclination and capacity to save," a spokesman for ING Direct, Michael Smolders, said.

    New record crude oil prices will not help, with increased prices already hitting bowsers.

    The average pump price for unleaded petrol in Sydney hit 134.9 cents a litre yesterday, marking the peak in the usual weekly cycle, according to the general manager of FUELtrac, Geoff Trotter.

    But worse is to come, with Mr Trotter predicting Sydney pump prices will hit 139.9 cents a litre next week, just 6 cents shy of the record price set after Hurricane Katrina.

    With voters feeling the pinch, political leaders traded blows on who was best equipped to solve the housing affordability problem.

    "Make no mistake, families are doing it tough," said the Labor leader, Kevin Rudd, calling on the Prime Minister to concede affordability was at "crisis levels".

    Both John Howard and the Treasurer, Peter Costello, have rejected the label of "crisis" to describe the housing squeeze.

    Instead, Mr Howard ridiculed Labor's plan, announced this week, to release surplus Commonwealth land for housing, saying this potentially included government landmarks such as Parliament House in Canberra.

    The Government is yet to release the findings of its own audit of Commonwealth and state land available for release.

    The Housing Industry Association's figure for the income required by first-home buyers is based on a borrower wanting a median-priced first home of $431,000, having a 10 per cent deposit, paying an interest rate of 7.75 per cent and a lender applying the traditional lending criteria that monthly repayments not exceed 30 per cent of income.

    A lesser amount would be required to satisfy lenders with more relaxed criteria.

    The overall index of housing affordability fell 2.1 per cent in the September quarter, marking 1½ years of declining affordability.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    The question is....what is the median annual income now in NZ then to cover this???