When interest rates hit 17% in 1990, household debt was dramatically lower. Today, even with the cash rate around 3–4%, many Australians feel greater pressure. Why? Because we’re carrying far more debt.
🏦 1990: High Rates, Low Debt
- Household debt to income: 67.9%
- Housing debt to income: 31.5%
- Cash rate peak: 17%
Back then, borrowing capacity was tighter and lending standards stricter. Property prices were also far lower relative to income.
đź“Š 2025: Lower Rates, Record Debt
- Household debt to income: 176.1%
- Housing debt to income: 132.4%
- Mortgage arrears: ~1.6%
Today, housing debt makes up nearly three-quarters of total household debt. As Rodney McLoughlin often explains to clients, even small rate movements now have a magnified effect on repayments because loan sizes are so much larger.
💡 Key takeaway: It’s not just the interest rate that matters — it’s the size of the loan attached to it.
🏠First Home Buyers: A $79,000 Head Start?
The expanded 5% deposit scheme is helping buyers enter the market sooner.
đź’° Potential Benefits
- National average gain: $79,000
- Sydney: up to $165,000
- Brisbane: $127,000
- Melbourne: $75,000
By buying earlier, first home buyers avoid years of rent, skip lender’s mortgage insurance, and capture capital growth.
⚠️ However, there’s a trade-off. More demand without increased supply can push prices higher. Treasury modelling suggests the scheme may lift prices modestly over time.
Rodney McLoughlin notes that strategy is crucial here — entering the market is powerful, but borrowing at 95% means buyers must be comfortable with higher sensitivity to rate changes.
🔄 Investors Shift Markets
Investor momentum is cooling in parts of Queensland and WA, particularly mining-driven regions where growth has peaked.
📉 Declines in investor activity:
- Townsville: -65%
- Mackay: -46%
- Port Hedland: -55%
Meanwhile, Victoria and Tasmania are attracting renewed interest due to improved yields and softer entry prices.
🎯 The pattern is clear: capital is rotating towards value and stronger rental returns.
🏗 The Bigger Picture: Supply Still Rules
Despite high debt levels, default risk remains low due to strong employment and strict lending standards.
But the long-term solution remains unchanged:
👉 More housing supply.
Policies that boost borrowing capacity — tax settings, grants, deposit schemes — often increase demand. Without additional homes, prices continue rising.
In today’s market, informed decisions matter more than ever. With debt levels near record highs, the structure of your loan and the timing of your move can make a significant difference.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 20 February 2026.
Rodney McLoughlin is a trusted real estate professional with deep insights into the Australian property market. For personalized advice and market expertise, reach out to Rodney today.
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