In this discussion paper, the author estimates the total cost of a mortgage as a proportion of wages over the 30-year life of a standard home loan. To do this, he compares home prices, mortgage rates, and wage changes to see what proportion of a median income would go to covering the cost of the median mortgage.

The results reveal a significant increase in the lifetime expenditure on the median mortgage over three decades, and a consequent reduction in the spending capacity of average Australian households.

• For a Silent Generation family buying in 1970, the average repayment cost over the course of the mortgage was 11.2% of their gross income.
• For a Baby Boomer family buying a home in 1985, the average repayment cost over the life of the mortgage came out at 19.5% of gross income.
• For a Generation X family though, who bought in 2000 and have approximately nine years left to go on their mortgage, we estimate they will spend 25.5% of their gross income on servicing mortgage debt.