The Reserve Bank of Australia has issued a chilling warning urging home owners to have a mortgage 'buffer' as more people take on dangerous levels of debt.
Official data from the banking regulator has revealed almost a quarter of people with a new loan owed the bank at least six times what they earned.
Australian real estate is now so expensive the national median house and unit price of $698,170 would see an average-income earner struggle to repay a loan.
Even with a 20 per cent deposit, a full-time worker on a $90,329 salary, with a $558,536 mortgage, would be saddled with a debt-to-income ratio of 6.2.
The Reserve Bank of Australia has issued a chilling warning to borrowers as more people take on dangerous levels of mortgage debt. Official data from the banking regulator has revealed almost a quarter of people with a new loan owed the bank at least six times what they earned
The Australian Prudential Regulation Authority considers a debt ratio of six to be dangerous and on Tuesday released new data showing 23.8 per cent of new borrowers in the September quarter of 2021 were in this category.
That is a big jump from the 16.3 per cent proportion a year earlier.
In the year to November, property prices across Australia rose by 22.2 per cent - the fastest annual pace since 1989, CoreLogic data showed.
The Reserve Bank on Tuesday left the cash rate on hold at a record low of 0.1 per cent but Governor Philip Lowe issued a warning to borrowers.
'With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers,' he said.
RateCity research director Sally Tindall said Australians taking on too much debt would struggle when interest rates rose.
The Australian Prudential Regulation Authority considers a debt ratio of six to be dangerous and on Tuesday released new data showing 23.8 per cent of new borrowers in the September quarter of 2021 were in this category. That is a big jump from the 16.3 per cent proportion a year earlier (pictured is an auction at Hurlstone Park in Sydney's inner west)
'Australians are increasingly taking on eye-watering levels of debt, compared to what they earn, to get into an overheated property market,' she said