Housing affordability is the best it’s been in two decades with mortgage repayments now consuming the smallest proportion of earnings since 1999, the Housing Industry Association says.

Softer housing markets and a reduction in interest rates combined to improve affordability during the June Quarter, while average earnings have begun to improve modestly.

“For a home-buyer with an average income purchasing a median-priced dwelling, assuming a 10% deposit, mortgage repayments will consume the smallest proportion of their earnings since 1999,” says HIA senior economist Geordan Murray. “The main reason the HIA Affordability Index today is comparable with the level in 1999, despite house prices rising significantly faster than incomes, is that interest rates are 4.6% today compared with 6.7% in 1999.”

Murray says average earnings have increased by 113% over the last 20 years, while the median home price has increased by 228%. But lower interest rates mean the cost of servicing a loan has remained the same.