The Income Sweet Spot for a Mortgage: $200,000 to $500,000

The dream of owning a home in Australia is becoming an increasingly exclusive club. According to new data from Westpac, Australia’s second-largest mortgage lender, the financial threshold to secure a mortgage comfortably sits between $200,000 and $500,000 in household income. For many Australians, this marks a stark departure from previous decades, where lower and middle-income households could realistically aspire to enter the property market.

Today, those with a household income under $200,000 face an uphill battle to qualify for a mortgage, let alone secure the property of their dreams. For households earning closer to $100,000, mortgage brokers may struggle to find a lender willing to approve a loan, particularly in the current economic climate of high property prices and climbing interest rates.

New data released by an Aussie banking giant has revealed exactly how much you need to earn to get a mortgage – and it’s not pretty.

The Shift in Lending Preferences

The data reveals a sharp decline in the proportion of loans granted to households earning below $200,000. Instead, lending is increasingly skewed toward higher-income households earning between $200,000 and $500,000 or more. Just four years ago, these households were a minority in the lending market. Today, they dominate, reflecting the growing barriers to entry for younger and lower-income Australians.

This shift isn’t just about rising incomes or inflation-adjusted salaries. While wages have grown modestly, the rise in lending thresholds far outpaces typical wage inflation. This suggests that it’s not just income levels that have changed – it’s the entire structure of the housing market. Banks are increasingly favouring borrowers with higher disposable incomes and larger financial buffers, leaving many Australians feeling locked out of the market.

Deposits Are Bigger Than Ever

Even for those who meet the income criteria, the challenge of saving for a deposit has reached new heights. Westpac’s data shows that the median deposit for first-home buyers has surged to an eye-watering $155,000. For many, this requires years of disciplined saving or financial support from family. Owner-occupiers, by comparison, are now contributing close to $300,000 on average as deposits, while property investors often bring even larger sums to the table.

The increased deposit requirements reflect both the soaring property prices and lenders’ more conservative risk appetites in an environment of higher interest rates. For first-home buyers, this can mean delaying their purchase until their 30s or 40s, significantly later than previous generations. In many cases, it also means first-home buyers are relying on financial gifts or inheritances from their parents – a trend that exacerbates inequality in the housing market.

A Changing Profile of First-Home Buyers

Despite these obstacles, first-home buyers still make up about 20% of the market. While this figure is close to the long-term average, it has fallen sharply from the pandemic-era peak during 2020-21, when government incentives such as the First Home Loan Deposit Scheme made it easier for younger Australians to enter the market.

However, the profile of first-home buyers is changing. Today’s buyers are older, often dual-income households with stable, high-paying jobs. Many are also entering the market with grey hairs, reflecting the years it takes to save for a deposit in the current economic climate. For some, the burden of paying off their mortgage will extend well into retirement, with many Australians now using their superannuation to clear their housing debt in later life.

Housing Affordability and the Rise of Housing Poverty

The implications of this trend extend beyond individual households. With fewer Australians able to achieve home ownership, the country faces a growing divide between property owners and renters. One of the groups most affected by this divide is retirees. Pensioners who don’t own their homes are among the most vulnerable to poverty, particularly in capital cities where rents are high and rental stock is scarce.

For those who do retire with mortgages, their reliance on superannuation to pay off debt places additional pressure on retirement savings. This trend could reshape Australia’s pension system, making it increasingly difficult for governments to adjust pension rules if many retirees are dependent on it to meet housing costs.

What Does the Future Hold?

There is some hope on the horizon. Westpac predicts that interest rates may begin to fall in 2025, potentially easing borrowing conditions. However, the recovery is expected to be slow, with only a modest 3% rise in dwelling prices forecast for 2025 and stronger growth of 7% anticipated by 2026. For those outside the $200,000+ income bracket, this may present a rare window of opportunity to enter the market, particularly if unemployment remains stable and property prices stay within reach.

Nonetheless, the structural challenges facing the Australian housing market remain significant. High property prices, increased lending thresholds, and soaring deposit requirements continue to create barriers for younger and lower-income households. For aspiring homeowners, navigating these challenges requires careful financial planning, strategic saving, and exploring all available options.

Flexible Solutions with Renown Private Lending

At Renown Private Lending, we understand the unique challenges facing Australians in today’s housing market. Whether you’re a first-home buyer, an investor, or an owner-occupier looking to upgrade, our tailored private lending solutions can help you achieve your property goals. With competitive rates, flexible terms, and fast approvals, we’re here to support Australians at every stage of their property journey.

Don’t let high deposits or stringent lending criteria hold you back. Contact Renown Private Lending today to explore how we can help you secure your dream home or next property investment.

Looking to navigate this changing landscape? Renown Lending offers flexible solutions tailored to help Australians achieve their property goals. Contact us today to explore how we can assist.