Major banks are allowing first homebuyers to sign up for mortgages so big they are left paying more than half their net monthly income on loan repayments.
A survey carried out by The Weekend Australian found that the top four banks will lend up to $465,000 to a first time buyer earning a salary of $70,000 a year.
Taking Westpac's current variable mortgage rate of 5.64%, a loan of $465,000 taken over a 30 year term would leave a borrower making monthly repayments of $2,731.
A borrower earning a salary of $70,000 would take home approximately $4,583 a month in after-tax income, leaving a little over $1,850 (or just 39% of net income) - once the mortgage is repaid - for other expenses and living costs.
According to the Australian Bureau of Statistics (ABS), a borrower is suffering mortgage stress when they are paying 30% of their income on a home loan. The loans currently being approved by major banks, according to the survey, mean some borrowers are spending as much as 60% of their disposable income on mortgage repayments.
The survey found that Westpac would lend $465,000 to a first homebuyer earning $70,000, the CBA $444,000 and NAB $380,000 (as well a credit card with an $8,000 limit). The loans are offered on the proviso that borrowers take out mortgage insurance.
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