Mortgage serviceability measures the share of household income required to meet initial mortgage repayments, assuming a first-home buyer purchases an entry-priced property (25th percentile) with a 20% deposit. Home prices determine how long it takes to save a deposit, mortgage serviceability determines whether ownership is sustainable once buyers enter the market.
- Serviceability is positioned as the key test of whether ownership is sustainable after purchase, not just attainable.
- High repayment burdens are described as:
- Reducing financial flexibility.
- Increasing vulnerability to future rate rises.
- Elevating the risk of long-term financial stress.
- A stated synthesis for 2026: first-home buyers face a dual affordability constraint—deposits take longer to accumulate, and repayments remain elevated upon entry.
The mortgage stress Australians are feeling is not imagined. The numbers are screaming!
As a general guide, spending more than 30% of gross household income on mortgage repayments is considered mortgage stress.
In 2026, that benchmark remains out of reach for most first-home buyers purchasing houses — particularly in the capital cities. The average household income spent on mortgage in the capitals is 48.9% for house and 30.9 % for units.
These are the statistics according to a Domain first home buyer report.
Mortgage Serviceability is very strained
Geography now plays a definitive role in first-home buyer sustainability.
Regional Australia: More Manageable — But Not Easy
Regional markets continue to offer the most favourable outcomes:
- Entry-priced units: 26.9% of income (below the 30% stress threshold)
- Entry-priced houses: 34.4% of income
While regional houses remain above the recommended benchmark, they compare far more favourably than capital city markets.
Mortgage repayments as a percentage of income on an entry-priced home as a percentage of income (Couple aged 25–34)
| Area | Entry House | Entry Unit |
| Sydney | 61.8% | 34.7% |
| Melbourne | 41.4% | 25.4% |
| Brisbane | 50.0% | 38.6% |
| Adelaide | 44.0% | 31.0% |
| Perth | 42.0% | 29.6% |
| Hobart | 39.3% | 29.6% |
| Darwin | 31.2% | 19.6% |
| Canberra | 40.2% | 21.7% |
| Combined Capitals | 48.9% | 30.9% |
| Combined Regionals | 34.4% | 26.9% |
| Australia | 44.9% | 29.8% |
Combined Capital Cities: Highest Repayment Burdens
Conditions are significantly more challenging in metropolitan areas:
- Entry-priced houses: 48.9% of household income
- Entry-priced units: 30.9% of income
Despite interest rate reductions in 2025, these levels remain well above sustainable thresholds for houses. Monetary easing has slowed deterioration — but it has not reversed it.
Higher repayment burdens:
Reduce financial flexibility
Increase exposure to future rate increases
Constrain savings capacity
Heighten the risk of prolonged financial pressure
Every Capital City Is in Mortgage Stress for Houses
All capital cities now exceed the 30% mortgage stress benchmark for entry-priced houses.
The Lightest Burdens:
- Darwin: 31.2%
- Hobart: 39.3%
- Canberra: 40.2%
- Melbourne: 41.4%
Melbourne, Canberra and Hobart were the only capitals to record an annual improvement in serviceability.
The Heaviest Burdens:
- Sydney: 61.8%
- Brisbane: 50.0%
- Adelaide: 44.0%
- Perth: 42.0%
Sydney remains the most stretched market, with entry-level house repayments consuming nearly two-thirds of household income.
Units No Longer Provide Relief
Units traditionally offered a buffer against repayment pressure. That buffer is now weakening.
Unit mortgage stress now exists in:
- Sydney: 34.7%
- Brisbane: 38.6%
- Adelaide: 31.0%
In 2020, no capital city experienced unit mortgage stress. In 2026, three capitals exceed the threshold — signalling a structural shift in lower-end market dynamics.
A Structural Shift Over Five Years
Serviceability has deteriorated sharply since 2020, particularly following the rapid rate increases of 2022–2023.
Following the aggressive rate hikes of 2022–2023:
- Capital house repayment burdens are now 24 percentage points higher than five years ago.
- Capital unit burdens are 11 percentage points higher.
- Regional house burdens have risen by 18 percentage points.
- Regional unit burdens have risen by 13 percentage points.
Although rates eased in 2025, higher property prices and larger loan sizes have locked in elevated repayment ratios. The 2026 rate rise adds renewed pressure.
This is no longer a cyclical affordability challenge — it is structural.
How Rankings Have Changed
For Houses:
- In 2020, only Sydney was in mortgage stress. Now every capital exceeds 30%.
- Brisbane has moved from the fourth-best market to the second-worst.
- Adelaide has shifted from most serviceable to third-worst.
- Melbourne has improved relative position.
- Hobart has moved from third-worst to second-best.
For Units:
- Brisbane now has the highest repayment burden.
- Melbourne has improved from second-worst to third-best.
- Perth has slipped from second-best to fourth-worst.
- Adelaide has deteriorated from third-best to third-worst.
These shifts reflect rapid price growth in previously affordable cities.
Government schemes matter: Help to buy scheme ease on mortgage
The Help to Buy (HTB) scheme reduces the proportion of income required for repayments compared to purchasing without assistance.
The proportion of income needed under Help to Buy (HTB) compared to not using the scheme on an entry-priced home
| Area | Houses | Houses HTB | Units | Units HTB |
| Sydney | 61.8% | 54.2% | 34.7% | 30.4% |
| Melbourne | 41.4% | 35.2% | 25.4% | 21.6% |
| Brisbane | 50.0% | 42.5% | 38.6% | 32.8% |
| Adelaide | 44.0% | 37.4% | 31.0% | 26.4% |
| Perth | 42.0% | 36.7% | 29.6% | 25.9% |
| Hobart | 39.3% | 33.4% | 29.6% | 25.2% |
| Darwin | 31.2% | 26.6% | 19.6% | 16.7% |
| Canberra | 40.2% | 36.7% | 21.7% | 19.8% |
| Combined capitals | 48.9% | 42.3% | 30.9% | 26.7% |
| Combined regionals | 34.4% | 29.3% | 26.9% | 22.9% |
| Australia | 44.9% | 38.7% | 29.8% | 25.6% |
Note: Sydney, Canberra, Perth and Darwin used the maximum income threshold of $160,000 for a couple on the Help to Buy scheme; all other cities used ABS incomes. Assumes a 2% deposit.
What This Means for First-Home Buyers
The early years of a mortgage are typically the most financially demanding:
- High debt levels
- Limited equity
- Minimal financial buffers
While rising incomes can ease pressure over time, high living costs, elevated house prices, and renewed interest rate uncertainty mean many first-home buyers are entering the market under sustained financial strain.
The conclusion for 2026 is clear:
Saving the deposit is only part of the challenge. Long-term sustainability depends on serviceability — and that pressure remains intense across much of Australia.
Would you like to find a home loan you can service? Compare home loans on Ratebuster.
Use our home loan repayment calculator to find out how serviceable a home loan is to you.
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