PHOTO: The property market remains red hot, with sky-high demand and low interest rates pushing up prices. Source: Supplied

Households are spending more of their income to meet mortgage repayments and there are fears of a debt disaster if borrowing becomes easier.

Housing affordability in Australia has deteriorated due to rising property prices amid sky-high demand from owner-occupiers, specifically first-home buyers.

A new report by ratings agency Moody’s shows that, on average, dual-income households needed 24.6 per cent of their monthly income to meet home loan repayments last month, rising from 23 per cent in September and 22.7 per cent mid-2020, when new mortgages were their most affordable in a decade.

The deterioration in housing affordability was evident in all capital cities over the five months to February, with Perth remaining the most financially achievable and Sydney the least.

Moody’s warns housing affordability will continue to worsen for the rest of this year despite record low interest rates, given dwelling prices keep surging but incomes remain low.