HOME ownership is becoming increasingly out of reach for some as rising property prices and high interest rates lock buyers out of the market in Newcastle.
Singles earning an annual income of $100,000, with no debt or dependants, are struggling to borrow $500,000, according to Newcastle-based mortgage broker Ben Eick from Nectar Mortgages.
"We are still getting the same amount of enquiry, but their ability to borrow is just so difficult at the moment," Mr Eick said.
"That example was true before the last rate rise we had, so it's actually even worse now.
"Every rate rise equates to around $20,000 less that you can borrow, which doesn't sound a lot but after five rate rises in a row, that's $100,000.
"People who could potentially borrow $700,000 or $800,000 for a nice house in Mayfield can now only borrow $600,000 or $500,000 after these rates rises."
The Reserve Bank of Australia (RBA) is expected to hold the cash rate unchanged at a 12-year high of 4.35 per cent at its June meeting.
The two-day meeting began on Monday ahead of the announcement on Tuesday afternoon.
The RBA has handed down 13 rate rises since the first in May 2022 and the latest in November.
Even if the RBA holds the cash rate steady on Tuesday, rising property prices and lack of supply paint a grim picture for those trying to get a foot in the market.
According to the latest CoreLogic Home Value Index data, house prices in Newcastle and Lake Macquarie increased 0.5 per cent in May to hold a median price of $924,587.
Experts predict the median house price in the region could hit a record high by August.
House prices in Newcastle and Lake Macquarie hit a peak at $937,630 in April 2022.
Meanwhile, dwelling values (houses and units) in the region recorded an uptick of 0.4 per cent in May, with the median sitting at $890,319.
The record high median dwelling price was $897,381 in April 2022.
Meanwhile, a smaller number of homes are hitting the market.
According to CoreLogic, total listings remaining relatively low across Newcastle and Lake Macquarie, down 14.9 per cent on the decade average for this time of the year and 7.6 per cent lower than at the same time last year.
Buyers locked out of the property market
According to Finder, a household would require a minimum income of $171,233 to afford the average national house price of $867,188 in Australia.
The latest Australian Bureau of Statistics data shows the average full-time worker in Australia earns $98,218 per year.
To afford the average national price of a unit ($610,789), the minimum household income would need to be $120,598.
The calculation is based on the average variable home loan interest rate, an 80 per cent loan to value ratio with a 20 per cent deposit and 30 per cent of gross income as the threshold for mortgage stress.
Mr Eick added that very few of his clients who earn an annual income of $100,000 are free from debt, whether it be credit cards, car loans, personal loans or HECS.
"Throw in any of these liabilities and your borrowing capacity quickly drops even further," he said.
"At the moment most of the people who can borrow are couples and if you are a couple with kids or have a car loan or whatever it may be, that brings the borrowing capacity down.
"That is why it is so hard for people in Newcastle.
"Newcastle is being a little outstripped by property prices increasing, but our wages aren't anything like what they are in Sydney, Melbourne or Brisbane."
Mr Eick said the high buffer banks placed on assessment rates added to the difficulty for borrowers.
"The banks put a three per cent buffer on the assessment rate, so the rate is 6.2 per cent, which is pretty much average, but the bank will assess the loan at 9.2 per cent which is the box we have to tick before the bank will lend the money," he said.
"What banks could do to help this would be to potentially reduce that buffer rate from 3 per cent to 2 per cent, which is still plenty of wiggle room."
