Australia's Mortgage Burden Heavier Than in 1980s Rate Hikes, Analysis Shows

Australia’s national mortgage burden is heavier now than it was when lending rates reached 17% at the end of the 1980s, new analysis reveals.

Terry Rawnsley, an urban economist at KPMG, said his research was in part a “myth-busting” exercise aimed at rebutting oft-repeated claims that previous generations had it harder when it came to buying and paying off a home.

“From this perspective the data tells a pretty clear story,” Rawnsley said.

“In the past, paying off a home loan has been a source of security, it’s increasingly a source of anxiety.”

Mortgage rates hit 17% in mid-1989 (the Reserve Bank’s cash rate peaked at 17.5% in 1990) and stayed around that level for close to a year, according to RBA historical data.

The KPMG analysis shows how in early 1990 interest payments as a share of household income reached 5.7%, with interest on dwellings at 3.4% and interest on consumer debt of 2.3%.

Fast forward to early 2026, when home loan rates averaged 8.3% through the three months to March.

Soaring home values have pushed homebuyers to borrow more and more over recent decades, even as home ownership rates have tracked steadily lower.

Despite lending rates being only half what they were at the end of the 1980s, households in total were dedicating a much higher 5% of their income to servicing their mortgages, and 5.4% once consumer debt obligations were included.

The total debt burden figure will push towards 6% once the full impact of this year’s three interest rate hikes flow through to borrowing rates, Rawnsley said.

He said while the late 1980s and early 90s were often cited as the historical peak for home loan stress, “the data shows that borrowers have actually faced tougher conditions over the past few years”.

Of course, homeowners faced other challenges then – not least an unemployment rate that pushed into double digits.

Rawnsley said the data he analysed was a combined total of household income and interest payments – and that within the high level numbers was concealed a wide range of outcomes.

“This aggregate number is the best we can look at,” he said.

“Inside of that will be some first-time buyers up to their eyeballs in debt, those halfway through their mortgage periods and so not too worried, and people who bought 20 years ago who aren’t affected.”

Climbing interest rates, rising cost of living associated with the Middle East conflict, and recent tax reforms have combined to trigger a dip in Sydney and Melbourne home prices over recent months.

But Tim Reardon, the chief economist at the Housing Industry Association, said any price relief would be short-lived, pointing to HIA analysis showing housing affordability was at its worst on record stretching back to 1994.

“This decline is fairly typical of what we have seen over the past 25 years: you get short periods of price declines followed by longer periods of rapid price growth,” he said.

“Even a fall of 5-10% in home prices only takes them back to where they were 12 to 18 months ago.”

Reardon agreed that it was harder to buy a home today than it was at the end of the 1980s, and was critical of Labor’s reforms to CGT and negative gearing on the basis it would reduce much-needed supply.

“If you can keep rental vacancies above 3%, then nominal home prices won’t change, and that would be a success in housing policy.

“The goal should be stable home prices for a long period of time, perhaps for longer than a decade.”