This article brings up an interesting side effect of the current inflationary cycle, I know it has had an affect on my kids with a mortgage, all of a sudden the days on being told don't worry Dad the mortgage isn't a problem, are over.
They are very concerned about the amount of working life they have available to pay off the mortgage, especially now as mine closures accelerate, scary times for many.
How the Government lands this, without collapsing house values will be interesting.
In the past it has usually been done with a recession, if they are going to avoid it with increasing wages, eventually that has to manifest in the economy somehow. Do prices continue to climb, or do they fall, in the past it just ended in a crash, this time who knows.
If wages don't have much of an effect, maybe businesses and real estate wont keep rising to what the market can bear this time.
Interesting times.
Mortgage affordability is at its worst since 1990 as house prices rise further out of reach – and the fallout may be wide-ranging.
The sharpest rise in interest rates in decades could leave younger Australians more cautious and risk-averse as they face more uncertainty, social and economic experts say.
But the silver lining could be to make future leaders more resourceful after adapting to a blowout in mortgage costs alongside other crises.
Experts say 13 consecutive interest rate rises have affected the psyche of a generation. The hiking cycle and housing crisis hit home within a few years of the catastrophic bushfires of 2019 and a series of floods – exacerbated by climate change – plus the pandemic.
The challenges faced by Millennials and Generation Z give the Baby Boomers’ experience in the 1980s and 1990s a run for their money, despite their 17 per cent interest rates, a stock market crash and a recession.
Even after former Reserve Bank governor Phil Lowe predicted rates would be on hold until 2024 and then had to reconsider,
mortgage affordability is now at its worst since 1990 in Sydney and Melbourne, and a home owner who bought a typical house in April 2022 would now need to find an extra $2951 in monthly mortgage repayments in Sydney or $2085 in Melbourne. Sydney’s median house price hit a
record of almost $1.6 million last week; Melbourne is
above $1 million and rising.
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ANU demographer Dr Liz Allen said uncertainty had filtered through every aspect of younger Australians’ lives.
“We have housing insecurity, alongside housing affordability issues, paid work insecurity, and climate disaster looming. We have enormous elements of gender inequality,” Allen said.
She said wages failed to keep up with rising house prices and mortgage rates, which affected many middle-class young Australians’ decisions and ability to take calculated risks.
“It disrupted and uprooted lives and the psyche of people,” Allen said. “We have this perfect storm of uncertainty, which necessarily will impact decision-making about the types of risks and chances people take.”
The slow ratcheting of housing unaffordability thanks to 13 rate rises had crushed the Australian dream of homeownership, demographer Mark McCrindle said.
“It sounds like it’s an economic problem, but it’s at its core, a very emotional issue. Home ownership is about family. It’s about neighbourhood. It’s about community,” McCrindle said.
He said there was an understandable sense of angst among a generation who felt the social contract of working hard to get ahead had frayed, even after adapting by moving further away, opting for units and working side-hustles.
“But when even with all of that, it just no longer becomes feasible – that is read as a breach in the social contract. The deeper problem with that is that home ownership is a key element of community cohesion,” McCrindle said.
He said younger generations were less likely to be able to chase better suited jobs, fulfilling pursuits, volunteering and
even having children.