My granddad walked 10 miles to school in the snow—barefoot—and my mum paid 17% p.a. on her first mortgage. And while I might have a penchant for avocado on toast, I’ve finally been handed proof of my suffering: My mortgage burden is officially worse than the Boomers’.
Every generation has its defining economic trial. For the Baby Boomers, it was likely the late 80s and early 90s recession-driven inflation spike. And while many older Aussies are sympathetic, younger homebuyers’ affordability struggles are often trivialised, put down to an obsession with soy lattes and Netflix (guilty as charged, but that’s beside the point).
Homebuyers today face a heftier interest bill than their parents
A new analysis of Australian Bureau of Statistics (ABS) data by KPMG has revealed a larger portion of household income is being swallowed by interest payments today than when the RBA cash rate was sitting at a terrifying 17.5% in 1989. That’s despite home loan interest rates hovering around 6% p.a. in recent years.
“Paying off a home loan has traditionally been a source of financial security,” KPMG senior economist Terry Rawnsley said. “But increasingly, it is becoming a source of financial anxiety as repayment pressures rise again.”
Indeed, 5.5% of average household income was carved out by home loan interest in the latter half of 2024 (right when I bought my first home), significantly more than the high of 3.5% reached in the September quarter of 1989.
Add the burden of interest on consumer debt, and borrowers in early 1990 saw 5.7% of household income eaten up, compared to 5.9% through much of 2024 and 5.4% in the first quarter of 2026.
That’s not to say Boomers had it easy or that Millennials have a sole claim to financial suffering. In fact, the so-called ‘forgotten generation’, Gen X, drew the short straw. What was likely the peak of their mortgage years (when Gen X were aged in their late 20s to early 40s) saw the portion of household income servicing dwelling debt soar to 6.4%, spurred by the Global Financial Crisis. Not to mention, with the exception of a couple of blips, unemployment in Australia hasn’t strayed far above 6% since the early 2000s. Compare that to the 90s, when it spent significant time in the double digits. Imagine if one in ten people today were unintentionally out of work!
That is to say, it’s been many moons since the Great Australian Dream was simple.
“To go back to a period when housing affordability wasn’t really an issue, you have to go back to the ‘50s and ‘60s,” AMP Chief Economist Shane Oliver told Canstar.
The larger issue today is household incomes haven't kept pace with housing prices.
Cotality data shows a homebuyer in 1986 would fork out a median $59,000. Today, the median house price in Australia is more than $1 million, marking a 1,630% rise. Meanwhile, the average full-time weekly wage in February 1986 was $404.20, compared to $2,051.10 in November 2025, as per ABS figures—a more modest 407% jump.
According to the latest RBA charts, which draw on data from the ABS, RBA, and Cotality, this disparity means house prices have lifted from two to three times household disposable income in the mid-90s to nearly six times today.
The result? Debt.
Over that same period, household debt has skyrocketed from around half of a typical household’s disposable income to roughly 1.8 times.
“When you've got higher interest rates and higher wage growth, you have a shock up front when you get into the market, and it seems like a huge burden,” Dr Oliver said. “But you can bet your bottom dollar that, within a few years, that burden would have diminished as your wage goes up and interest rates probably come down, as they did in the late '80s.”
How to minimise mortgage interest pain
The Australian public has been warned by the RBA Monetary Policy Board, which said just last month that it will “do what it considers necessary” to drive inflation down, including hiking interest rates for a fourth time this cycle.
“In today’s economy, higher house prices have led to bigger loans, leaving household budgets susceptible to even the most modest of interest rate rises,” Mr Rawnsley said. “Another interest rate rise will see interest repayments head towards 6% of household income.”
That makes it all the more important that homeowners take stock of their mortgage. Recent Canstar data showed home loan holders could be leaving thousands on the table, simply by failing to act on their interest rate.
For example, a borrower with a $600,000 mortgage balance, 25 years remaining on their home loan, and an interest rate of 6.98% p.a. could be more than $10,000 better off over the next two years if they were to refinance to a rate under 6% p.a.
“Borrowers often assume loyalty will be rewarded, but in the mortgage market that’s rarely the case,” Canstar's Data Insights Director Sally Tindall said.
Refinance your home loanShould younger Aussies bank on a housing market crash?
The likelihood of a full-blown housing market correction is low. If it were to occur, those stuck on the housing sidelines might rejoice, but the overarching impact could be dire. In the line of fire stand both older Australians banking on their bricks-and-mortar nest eggs and younger Australians who have entered the market in recent years with hefty mortgages.
Dr Oliver says we could feasibly soon see the end of a house price “supercycle”. He points out that the core drivers of property values in recent decades—the historical shift from high rates to low rates, the rise of two-income households, increased migration, and even banking deregulation—have largely petered out.
Meanwhile, house prices could soon be capped simply because people can’t afford them. On top of that, political pressure to reduce immigration and boost housing supply is ramping up, and chances are that interest rates won’t slump to levels seen during the pandemic. Add on any shifts in investor sentiment following the 2025-26 Budget changes, and house price growth could soon stall.
“It's possible that in a decade or so, wages might rise at a faster rate [relative to house prices],” Dr Oliver said. “But it's still unclear because there's still a chronic shortage of housing and we haven't really addressed that yet.”
