After the increase in interest rates by four banks, a boomer homeowner has asked young Australians living with mortgages for their resilience.

Tuesday’s announcement by the Reserve Bank saw a 0.25 percentage-point increase in official cash rates, up to 0.35 percent from the record low of 0.0.1%.

Ron de Gruchy (85), a Perth retiree, thinks younger Australians shouldn’t whine about the rate rise. He told The West Australian that the 17% interest rate on his mortgage was what he had ‘adjusted to’ back in 1990.

Perth retiree Ron de Gruchy (pictured) has called on young Australians in the housing market to toughen up following a rise in interest rates from the four major banks

Perth retiree Ron de Gruchy (pictured) has called on young Australians in the housing market to toughen up following a rise in interest rates from the four major banks

He stated that while the high interest rate was a squeeze on financial resources, he had just adjusted. 

He claims that he led a thrifty life, while still paying his mortgage. 

This frugality meant no night out, international travel, or visits to the casino. 

He said, “Back then people didn’t complain, they just adjusted.” 

‘Higher interest rates are not the end of the world but I think youngsters have got it pretty good.’

In the three last decades, mortgage debt has more than doubled. 

According to Macquarie University data, the median price of a Sydney house was $194,000 in 1990.

A full-time, average worker earning $28,168 had a debt to income ratio of 5.5% with a 20% deposit.

The median Perth house price was $101,125. This meant that a full time worker with a mortgage deposit and a small amount of debt had an income ratio of only 2.9.

Research from home loans marketplace Joust and Digital Finance Analytics (DFA) has revealed almost half of all homeowners with mortgages were already experiencing financial strain before the hike.

According to Joust’s home loans market and Digital Finance Analytics, almost half the homeowners in mortgages experienced financial hardship before they were increased.

Comparing 2022 and 1990

1990Sydney had a median home price of $194,000. The average salary for a full-time worker was $28,168.

The debt-to income ratio of 5.5 was achieved with a 20% deposit 

2022: Sydney median house price is $ 1,416,960 and the average, full-time salary is $90,917

The debt-to income ratio of 12.4 was achieved with a 20% deposit 

Sources: CoreLogic at Macquarie University; Macquarie University. Australian Bureau of Statistics. 

CoreLogic April data showed that Sydney’s median home price will be $1.417million in 2022.

An average full-time employee earning $90,917 with a 20% deposit would have a 12.4 debt-to-income ratio.

This threshold is greater than twice that of the Australian Prudential Regulation Authority’s’sixth’ threshold for mortgage stress. 

Perth’s April median home price was $578751, meaning that a full-time worker earning an average salary of $58,000 would still have a low ratio of debt to income at five.

Ticky Freeman, The Australian’s Business Editor at Large said it was not fair to compare the state of home ownership today with 30 years ago.

‘In the old days when interest rates were high, a move didn’t hit people as much, because the interest rates were so high (anyway),’ she said. 

“These days that is quite a large increase.

“My rate was 16 percent in the 90s which was quite high. You didn’t feel any change when rates increased by 25%.

According to Finder research, the average loan amount in 1984 was 3.3x the annual average income. Today it’s 6.8x.

The average Australian would need 10 times their annual income to purchase a house in 2022.   

Nearly half of mortgage holders were experiencing financial hardship before the increase in interest rates. 

Joust, Digital Finance Analytics and other research found that mortgage stress is affecting 42.2 percent of the population or approximately 1.539 million individuals.

In general, mortgage stress refers to borrowers who pay more than 30% of their income toward repayments.