From the start, it was a matter of deciding what you wanted to buy.
Then, as the market began to recover, the question of whether you should be buying a home or a property seemed like it would be settled by the number of bedrooms, bathrooms and bathrooms.
But a new data-driven study has suggested that a lot of that debate has been wrong.
And it’s about to be wrong again.
The findings of the report by mortgage experts, housing and mortgage lender Centrelink, reveal a major new reality in the housing market.
“It is a real problem,” says Michael Bays from Centrelisk.
“It’s a fact.
It’s a serious problem.”
It is not a case of people being over-enthusiastic about buying.
It is actually a serious crisis for the banks, he says.
The study found that of the 637,000 people who took out a mortgage, just under half of them, or 49%, had to wait until their second or third loan was due to pay off, while another 44% had to pay interest.
The remaining 70% of borrowers were left with mortgage debt that was more than 10 times their income.
The average amount of debt for people with mortgages was £10,000.
That was even higher for first time buyers with mortgages of £20,000 or more.
The study also found that mortgage debt is increasingly being paid off with interest, and is now being paid for with money borrowed from a bank account rather than being paid by the borrower directly.
According to the report, this is likely to cause a significant rise in interest rates and lead to borrowers being priced out of the market.
“We believe this is a serious issue,” says Bays.
“In the meantime, the banks have got to work out how they are going to make it easier for borrowers to repay their mortgages.”
But while it is clear that borrowers are being priced-out, it is also clear that the problems are far from over.
“People are not happy,” says Joe Stacey from the Centre for Economic Research.
“People are being overcharged.
There is a significant disconnect between what is happening on the ground and what the data is telling us.”
The report finds that the average rate of interest for a new home loan is currently 4.6% and that the maximum rate of return for a home loan in Sydney was 11.3%.
“The rate of profit on a house loan is around 8.5%, so this means the rate of returns are pretty high, but it also means that the bank is charging a lot more than it should be,” says Stacey.
“In fact, the bank has got to make a significant concession in terms of what they are actually charging borrowers.”
It also finds that in most of Australia, the average interest rate paid on a home mortgage is much higher than the average return.
“What we are finding is that the banks are charging higher rates on the interest payments than on the home loan payments,” says Mr Stacey, “because that is the nature of the relationship between the bank and the consumer.”
Mr Stacey says that in the US, interest rates on mortgages have increased over the last few years.
“It has increased in the United States because of the Great Recession,” he says, “but the banks in Australia are still charging more than they should be.
We have to ask the banks how much more is it they are charging than they are getting back?””
The banks are trying to get it under control, but in doing so, they are driving up the cost of the loan.”
“We have to ask the banks how much more is it they are charging than they are getting back?”
The report also says that the number one reason for borrowers being overpaid on their home mortgage, is because of high fees.
“The most significant charge for home loans is interest,” says the report.
“The most common reason for overpayments is the higher interest rates that are charged.”
“The increase in interest charges has not been confined to Australia, it has been seen in all states and territories,” says Ms Stacey with the Australian Institute of Mortgage Professionals.
She says this is due to the fact that lenders are paying interest rates in line with inflation.
“Interest is the major cost that lenders have to pay to borrowers in order to meet their mortgages.
It is very difficult for a borrower to pay the interest they are paying, because interest is not on the loan.
They are paying it out of pocket.”
She says that as well as having to pay fees, banks are also charging borrowers more for property insurance.
“This is because borrowers are more likely to be uninsured when they have a property,” says she.
When you pay off a home, you have to take out insurance on the property.
However, Ms Stacy says that lenders often offer less coverage than they do when a loan is