Mortgage rates hit 17% at the end of the 1980s, and it's still the number people point to when they say today's borrowers have it easy.
On paper, they have a point. Even after the latest interest rate hike, mortgage rates remain well below those seen nearly four decades ago. But Australians are also carrying far more household debt than they were back then, changing what those interest rates mean for borrowers.
Savvy analysis shows that, after accounting for how much more debt Australians carry relative to their income, today's mortgage rates are on a par with those of 1989.
Why are today's mortgages so crippling?
At first glance, today's much lower mortgage rates suggest Australians should have an easier time paying off their home loans than borrowers did in the '80s. But focusing on the headline rate ignores how dramatically household balance sheets have changed.
Australian households now carry considerably more debt relative to their income.
In September 1989, when mortgage rates were sitting at 17%, Australian households owed the equivalent of 67.9% of their annual disposable income. By June 2026, that figure had climbed to 178.4%.
That means households today carry more than two and a half times as much debt relative to their income as they did almost 40 years ago.
Using an estimated mortgage rate of 6.45%, based on RBA data and factoring in the latest cash rate rise, Savvy's analysis shows that today's mortgage rates are equivalent to approximately 17% (16.95%) in 1989 when adjusted for the increase in household debt relative to income.
In other words, while mortgage rates today are less than half what they were in 1989, the amount of debt Australians carry relative to their income has increased so much that the two periods are almost the same when interest rates are adjusted for household debt.
The increase in debt has been driven largely by housing. In September 1989, Australian housing debt was equivalent to 31.8% of annual household disposable income. By June 2026, that figure had climbed to 134.9%.
That means Australians now carry more than four times as much housing debt relative to their income as they did in 1989, leaving households far more exposed to changes in mortgage rates.
Even relatively small increases in interest rates can add hundreds of dollars to monthly repayments.
If the RBA lifts rates another 0.25 percentage points in November, the estimated average mortgage rate would rise to around 6.70%, pushing the total household-debt-adjusted equivalent to about 17.6% in 1989 terms.
Why are Australians carrying so much more debt?
The amount of debt Australians carry has changed dramatically since the late 1980s. Rising property prices, changes to lending practices and shifts in how Australians live have all contributed to the increase.
Houses have become more expensive
Australians are borrowing considerably more to buy a home, partly because property prices have grown much faster than earnings. The amount of money they're able to borrow has also changed significantly since the late 1980s. Financial deregulation during the 1980s increased competition between banks and made credit more accessible to households.
According to historical RBA data, the average new owner-occupier mortgage was $67,495 in 1989, equivalent to approximately $181,000 in today's money. By June 2026, that figure had reached $731,000, meaning the average new mortgage is now roughly four times larger, even after accounting for inflation.
Property prices have also increased relative to wages. In 1989, the average Australian house cost approximately 6.5 times annual average earnings. Using recent ABS data on dwelling values and weekly earnings, the average dwelling value is now equivalent to approximately 10.2 times annual full-time earnings.
Methodology: The 1989 mortgage figure includes refinancing, while the 2026 figure excludes it. The inflation adjustment uses the Consumer Price Index (CPI). The house-price-to-earnings comparison also uses different property measures, so the historical and modern figures are indicative rather than directly comparable.
More households have a mortgage
According to historical ABS data, 42.4% of Australian households owned their homes outright in 1990, compared with 31.0% in the 2021 Census. Meanwhile, the proportion of households with a mortgage increased from 29.2% to 35.0%.
| Home ownership | 1990 | 2021 |
|---|---|---|
| Own outright | 42.4% | 31.0% |
| Own with a mortgage | 29.2% | 35.0% |
| Sources: ABS Australian Social Trends, 1996; ABS 2021 Census | ||
With a greater proportion of households carrying mortgage debt and fewer owning their homes outright, more Australians are directly exposed to changes in interest rates.
Households look different today
The size and makeup of Australian households have changed considerably over the past few decades, influencing housing demand and the costs associated with running a home.
| Measure | Late 1980s / early 1990s | 2020s |
|---|---|---|
| Average people per household | 2.8 | 2.5 |
| One-person households | 20.0% | 25.6% |
| Households with two or more vehicles | 44.6% | 55.1% |
| Average floor area of newly built houses | 181 m² | 241.5 m² |
| Sources: ABS 1991 Census and ABS 2021 Census for household size, one-person households and vehicle ownership; ABS Building Activity, December 2008 and ABS Building Activity, December 2025 for newly built house sizes. Census figures compare 1991 with 2021. Average floor area figures compare 1987–88 with 2024–25. This is the closest available data to the periods being compared. While data for the exact years of 1989 and 2026 are not available, these figures provide an indication of how Australian households and homes have changed over that time. |
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Smaller households mean more homes are needed to accommodate the same number of people, adding to demand for housing.
Meanwhile, the average size of newly built houses has increased by more than 33%, despite fewer people living in each household. Larger homes can mean higher purchase prices, bigger mortgages and additional maintenance and energy costs.
Vehicle ownership has increased too, with more than half of households now having at least two cars. This adds to household expenses through registration, insurance, maintenance and, for those financing their vehicles, loan repayments.
How much income do Australians need to service today's average mortgage by 1989's standards?
In 1989, when mortgage rates reached 17%, the RBA calculated that repayments on the average new owner-occupier mortgage accounted for 30.4% of average household disposable income.
Using that same percentage as a benchmark, we calculated how much Australian households would need to earn today to service the average new mortgage without repayments taking up a greater share of their after-tax income.
Based on an estimated mortgage rate of 6.45% and a 25-year principal-and-interest loan, a household taking out Australia's average new owner-occupier mortgage of $731,000 would face repayments of approximately $4,913 per month, or almost $59,000 annually.
For those repayments to represent 30.4% of household disposable income, the household would need to earn approximately $194,000 a year after tax.
That's considerably more than many Australian households take home, meaning those earning less would need to devote a greater share of their income to mortgage repayments than the 30.4% benchmark recorded in 1989.
For example, a household earning $150,000 a year after tax would spend around 39% of its income repaying the average new mortgage. For a household taking home $120,000, that figure rises to approximately 49%.
Note: These calculations are illustrative and based on the average new owner-occupier mortgage, an estimated 6.45% interest rate and a 25-year loan term. They do not represent the actual repayments or incomes of typical Australian mortgage holders.
How much income is needed in each state and territory?
Using the same 30.4% repayment-to-income benchmark from 1989, we've calculated how much after-tax household income would be needed to service the average new mortgage in each state and territory today.
| State or territory | Average new owner-occupier loan | Monthly mortgage repayment | Annual disposable income required |
|---|---|---|---|
| NSW | $842,000 | $5,659 | $223,000 |
| VIC | $664,000 | $4,463 | $176,000 |
| QLD | $751,000 | $5,047 | $199,000 |
| SA | $672,000 | $4,516 | $178,000 |
| WA | $720,000 | $4,839 | $191,000 |
| TAS | $516,000 | $3,468 | $137,000 |
| NT | $545,000 | $3,663 | $145,000 |
| ACT | $666,000 | $4,476 | $177,000 |
| Australia | $731,000 | $4,913 | $194,000 |
| Sources: ABS Lending Indicators; RBA Financial Stability Review, September 2006; Savvy calculations Repayments are calculated using a 25-year principal-and-interest loan and an estimated 6.45% mortgage rate, based on RBA lending-rate data and the latest cash rate increase. Required income is calculated using the RBA's historical 30.4% repayment-to-disposable-income benchmark. Figures represent modelled after-tax household income requirements, not actual household earnings or bank lending criteria. Loan amounts are state and territory averages, not capital-city-specific figures. |
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NSW borrowers face the highest average new mortgage, with households needing approximately $223,000 in annual disposable income for repayments to account for the same proportion of income as the RBA's 1989 benchmark.
Even in Tasmania, which has the smallest average new mortgage in the comparison, households would need around $137,000 in annual disposable income to meet that benchmark.
Australians who faced 17% mortgage rates in 1989 were undoubtedly dealing with extraordinary borrowing costs. But comparing those rates with today's ignores how much household debt has grown in the decades since.
With Australians now carrying considerably larger mortgages relative to their incomes, even much lower interest rates can place substantial pressure on household budgets.
The question isn't simply whether mortgage rates are lower than they were in 1989, but how much debt Australians need to service and how much of their income it takes to repay it.
