Australia's national mortgage burden is now heavier than it was in 1989 when lending rates hit 17%, according to new analysis from KPMG. The data challenges the common belief that older generations faced greater difficulties in buying and paying off a home.
Current mortgage burden exceeds 1989 levels
Terry Rawnsley, an urban economist at KPMG, described his research as a “myth-busting” exercise. “From this perspective the data tells a pretty clear story. In the past, paying off a home loan has been a source of security; it's increasingly a source of anxiety,” he said.
In early 1990, interest payments as a share of household income reached 5.7%, with interest on dwellings at 3.4% and consumer debt at 2.3%. By contrast, in the three months to March 2026, with home loan rates averaging 8.3%, households were dedicating 5% of their income to mortgage servicing and 5.4% when including consumer debt. Rawnsley noted that the total debt burden could push toward 6% once the full impact of this year's three interest rate hikes flows through.
Rising home values drive higher borrowing
Soaring home values have forced homebuyers to borrow more over recent decades, even as home ownership rates have declined. Despite lending rates being only half of those in 1989, the proportion of income spent on mortgages has increased. Rawnsley said that while the late 1980s and early 1990s are often cited as the peak for home loan stress, “the data shows that borrowers have actually faced tougher conditions over the past few years.”
However, homeowners in the earlier period faced other challenges, including an unemployment rate that reached double digits. Rawnsley acknowledged that his aggregate data conceals a wide range of outcomes. “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,” he explained.
Price declines likely short-lived
Climbing interest rates, rising living costs linked to the Middle East conflict, and recent tax reforms have triggered a dip in Sydney and Melbourne home prices. But Tim Reardon, chief economist at the Housing Industry Association, argued that any price relief would be temporary. “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. Even a fall of 5-10% in home prices only takes them back to where they were 12 to 18 months ago,” he said.
Reardon agreed that buying a home today is harder than in the late 1980s and criticized Labor's reforms to capital gains tax and negative gearing, arguing they 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,” he added.
