Key takeaways:
Mortgage repayments are consuming a record share of household income, largely because Australians are taking on bigger home loans than previous generations.
Affordability isn't just about qualifying for a loan, it's also about ensuring repayments remain manageable as household circumstances change.
Borrowing below your maximum capacity may suit some buyers, depending on their financial goals, lifestyle and appetite for risk.
Existing homeowners may benefit from reviewing their loan structure, budgeting and refinancing options to help improve cash flow.
An Aussie Broker can help model different borrowing scenarios, compare loan options and understand what may be achievable based on your circumstances.
Getting approved for a home loan is one thing. Feeling comfortable making the repayments month after month is another.
New KPMG Australia analysis suggests that's becoming an increasingly important distinction, with Australian households now spending a record share of their income on home loan interest repayments.
For anyone thinking about buying, refinancing or upgrading, the findings are a reminder that affordability isn't simply about how much you can borrow. It may also be about choosing a repayment level that leaves room for life’s other expenses.
Why mortgage affordability is about more than interest rates
Interest rates remain an important part of the affordability equation, but they're only on part of the affordability picture.
As property prices have increased over time, Australians have taken on larger home loans, meaning even relatively small movements in interest rates can have a bigger impact on household budgets.
According to KPMG’s analysis, interest repayments peaked at 5.9% of household income in the December quarter of 2023, higher than the peak recorded during the early 1990s, despite mortgage rates being considerably lower than they were decades ago.
Since then, interest repayments have fallen to 5.4% in March 2026, up from 5.2% in the previous quarter.
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The figures represent household averages, so they won't reflect every borrower's experience. Many Australians continue to comfortably manage their repayments. However, the data also shows that home ownership is consuming a larger share of household income than it has historically.
For borrowers, that shifts the conversation from “How much can I borrow?” to “How much do I want to commit to repaying each month?”
Repayment comfort is becoming just as important as borrowing capacity
Lenders already assess whether borrowers can afford a home loan by applying serviceability requirements and assessment buffers.
However, what a lender determines is affordable may not always align with what feels comfortable for an individual household.
Aussie Broker Vicki Fraser said one of the most important conversations she has with clients isn't simply whether they can qualify for a loan, but whether they'll feel comfortable living with it.
“It's important not only that they can borrow the money and service the debt, but that we also have a conversation about what those repayments actually look like,” she said.
“It's not about giving someone the biggest loan possible and saying, 'Off you go.' It's about making sure they know how to manage the repayments and their cash flow.”
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For some buyers, that may mean choosing a lower purchase price, a different property type or another location if it provides greater financial flexibility.
An Aussie Broker can help model different borrowing scenarios so buyers can compare how changes in property price, deposit size or loan structure could influence repayments and longer-term affordability.
A simple budgeting exercise could help buyers prepare
One practical way to prepare is to treat your future mortgage like a trial run.
Aussie Broker Lisa Maxwell encourages prospective buyers to save the difference between their current rent and expected mortgage repayments before purchasing.
“Do that for a few months and you'll quickly work out whether you're comfortable with it,” she says.
“You might decide you want to borrow a little less, or you might find you're managing it easily and could even afford to pay an extra $500 a month.”
While every household finance is different, an Aussie Broker can help you understand how different repayment scenarios may fit within your broader budget before you commit to a loan.
Bigger mortgages often require bigger financial buffers
As loan sizes increase, maintaining financial flexibility can become more important.
Alya Manji of Aussie Hurstville said borrowing capacity shouldn't be the only consideration.
“I encourage clients to prepare a realistic budget. That isn't just fixed expenses. It also includes the things they genuinely enjoy and aren't going to give up. If it's going to McDonald's every week for a cheeseburger, then put it into the budget,” she said.
“I encourage them to retain some savings... because if something happens after they've taken out a loan... you don't want them feeling stressed if their circumstances change.”
It reflects a broader shift in how many Australians are thinking about affordability.
Rather than asking whether they can technically afford a loan today, many borrowers are also considering whether those repayments would still feel manageable if living costs increased or their circumstances changed.
The right borrowing level will differ for every household depending on income, expenses, financial goals, and risk tolerance.
Existing homeowners may also have opportunities to improve cash flow
The KPMG findings aren't only relevant for people entering the market.
Many existing homeowners have experienced higher repayments over recent years while also managing increased living costs.
Depending on individual circumstances, reviewing an existing home loan may help improve cash flow. That could include comparing interest rates, reviewing loan features, consolidating higher-interest debts where appropriate, or checking whether the current loan still aligns with longer-term financial goals.
Fraser says preparation isn't just about getting approved for a loan; it's about setting up borrowers for long-term success.
"We want them to buy the home, but we also want them to keep it,” she said.
Borrowers who'd like to understand how their current interest rate compares can use Aussie's Rate Radar to see how it stacks up against rates currently available in the market.
If your rate appears uncompetitive, an Aussie Broker can help explain whether refinancing or renegotiating with your existing lender may be worth considering, along with the potential costs, benefits and trade-offs.
What borrowers can take away from the data
The latest figures suggest affordability is no longer just about qualifying for a home loan. It's also about ensuring repayments remain sustainable over the long term.
That could mean buying a less expensive property, choosing a different location, saving a larger deposit or borrowing below your maximum capacity, depending on your circumstances.
The right approach will depend on your income, expenses, financial goals and personal comfort with ongoing repayments.
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While borrowers can't control property prices or interest rates, they can take steps to better understand what a mortgage might look like in practice.
Whether you're buying your first home, upgrading or reviewing an existing loan, understanding your borrowing power is only part of the equation. An Aussie Broker can help you compare loan options, model different repayment scenarios and understand what may be achievable based on your financial circumstances, helping you make a more informed property decision.