Sydney trumps all in mortgage servicability hurdles over the past 25 years: Aussie/Corelogic

Households in Sydney are generally dedicating the largest proportion of their annual incomes to service a mortgage, with the typical household dedicating 49% of their annual income to mortgage repayments, according to a report released last month by AHL Investments (Aussie Home Loans).

Darwin households generally show the lowest proportions of annual income that is dedicated to mortgage repayments, with 22% of annual household income being used to pay down mortgage debt.

Mortgage serviceability rates have improved since 2008, when the average household was dedicating 51% of their annual gross income to servicing a mortgage.

Mortgage serviceability data extends back to 2001 when the typical household was dedicating a much smaller proportion of their household income to service a mortgage, the Aussie report noted.

In 2001, households were dedicating an average of 26% of their gross annual income to mortgage repayments.

As housing values and interest rates moved higher, serviceability became more challenging, with the average proportion of household income required to service a mortgage reaching a peak of 51% in June 2008.

Despite dwelling values generally moving higher over the most recent five year period, mortgage serviceability has held reasonably firm thanks to mortgage rates trending lower.

Of course, as households reduce their principal loan amount, serviceability will improve.

With so much variance in the value of dwellings across the regions of Australia, mortgage serviceability measures show a broad range across the cities.