Boomers, Generation X or Millennials: Who has it worse when it comes to buying a home and paying it off?

When single mum Kerrie Boylett wanted to buy a home in 1995, almost all lenders turned her away.

Ms Boylett is now retired and aged 68, but back then she was 40, and had a nine-year-old daughter.

“It was a lot harder for me to get a loan as a single person and a woman — it was practically impossible,” she tells ABC News.

Ms Boylett eventually convinced one lender to give her a loan. She bought her first home in Coogee, NSW for $150,000, with a deposit of 15 per cent (which she says was based on a decade of her saving).

Her variable interest rate was a massive 19 per cent and her income was low, making it a daily struggle to afford to live.

“It was really hard, really hard — I mean, I remember once I had the electricity cut off for three days,” she recalls.

“There were no holidays until my daughter was 13. I would have dinner parties at my place for friends, instead of going out, by buying two kilos of meat and making a salad and spaghetti Bolognese and a cake. And that’s how I had friends and entertainment — at home.

“I got the cheapest car I could get for $1,000 … It was a struggle the first five years.”

Her first home needed major renovations.

“It had no kitchen other than a base in there at the time,” she says.

“I got onto the Trading Post and bought a kitchen for $300 and put that in. And we painted the unit … my daughter and I just stripped the floorboards back — it was all about doing the work yourself.”

After buying and selling properties over the years, Ms Boylett has upsized to a home in Balmain that’s now worth far more than what houses were worth in the mid-90s.

She thinks that her generation – the baby boomers – gave up a great deal to make ends meet. She says millennials need to also make sacrifices in the journey towards home ownership.

“They [millennials] want you know, the latest mobile phone, the latest iPad, they want a nice car, they want to go on holidays, they still want to go out to restaurants they pay $20 or $30 for a drink if they go out, have a nice time,” she says.

“You’ve got to say right, am I prepared to keep my phone for four years? Am I prepared to cut back?”

ABC News spoke to several economists and housing analysts as to which generation has had it tougher when it comes to breaking into the housing market, getting a home loan and paying it off to ultimately own their own home.

They say the answer as to who has it worse – the baby boomers (defined by PEW Research as anyone born from 1946 to 1964), Generation X (anyone born from 1965 to 1980), or millennials (anyone born from 1981 to 1996) — depends on whether you are looking at the plight of new home buyers or home owners in general.

The consensus is that while every generation has faced genuine struggles, the Great Australian Dream of owning your own home is becoming increasingly out of reach.

With more interest rate rises on the cards on Tuesday, and potentially later this year, that journey towards home ownership will take far longer.

The path to home ownership has become harder

According to Peter Tulip, chief economist at the Centre for Independent Studies, “home owners, or households, as a group are paying a larger share of their income in interest than they did in the 1980s, despite the fall in rates”.

Dr Tulip, a boomer himself, who previously worked at the Reserve Bank of Australia and the US Federal Reserve Board of Governors, says this is because home owners now have larger debts, relative to both incomes and assets.

He says although rates are nowhere near as high as they were back in the late 1980s, prices relative to incomes and are twice what they were a generation ago and access to finance is harder. That means the path to owning your own home is more difficult now than it ever was.

“Home ownership is going to be increasingly difficult,” he says.

“They’re squeezed in two ways. While interest rates are high, they also have huge prices. And rents are also very high. So overall, housing affordability is one of the biggest social problems Australia is facing.”

But Dr Tulip says if you are looking purely at the plight of a new home buyer trying to break into the market, they are better off in 2023 than they were in the 1980s, helped by lower interest rates relative to wages.

“Prices have risen much faster than incomes – but this has been more than offset by a larger decline in mortgage rates,” Dr Tulip says.

“Whereas interest payments on a new home represent 38 per cent of the average wage now, in 1989 they constituted 64 per cent.”

Dr Tulip has only included interest payments, not repayment of principal because, “the latter reduces household cash-flow but doesn’t change household wealth”, he argues.

However, the larger property prices faced by current buyers mean their principal repayments would be higher, bring their overall loan repayments closer to the peaks of the 1980s and early 90s.

Dr Tulip says the ratio of median house prices to incomes has roughly doubled from 1989 to 2023. In 1989 it peaked at five times the amount but was less than four for most of the 1980s. By January 2023 it was 7.9 times, having peaked at nine times during the pandemic housing boom.

While mortgage rates have fallen substantially more, declining by almost two-thirds, from around 17 per cent at the end of the ’80s to about 6 per cent variable rates currently.

But the interest on that loan is much lower and that more than offsets the higher prices, Dr Tulip says.

“The big obstacle faced by previous generations of first home buyers, especially in the late 1980s, was the high interest rates — I wonder how they were able to afford them,” he says.

“Now, in contrast, the interest rate is more manageable, but the deposit is much harder to get.”

He also sees more rate rises on the cards, with the cash rate hitting 4 per cent or more and variable rates reaching about 7 per cent or more.

“If inflation remains above the Reserve Bank’s target, then we’re going to need the cash rate to be well above the inflation rate — and that means a cash rate well above 4 per cent,” he says.

Why millennials will take longer to pay off a home loan

Grattan Institute program director Brendan Coates says the baby boomer first home buyers found it harder when they first got a mortgage because of the interest rates of 17 per cent or more at the time.

But he agrees that millennials — despite having a lower initial mortgage burden — will have a harder road over the life of the mortgage because the loans they take on are so much bigger.

He says boomers taking out the average loan in 1989-90, when interest rates peaked, paid a larger share of their incomes servicing the mortgage than millennials are today, even as interest rates have risen rapidly.

“Australians who have borrowed to buy a home recently, they’re paying roughly 33 per cent of their income to service that mortgage today,” he calculates.

“Whereas boomers back in the day, if they just recently bought, were paying up to 40 per cent of their income to service the average loan to buy the average house,” he says.

And for Gen X borrowers that bought 16 years ago in 2006 , he says mortgage repayments peaked at just over 30 per cent of the average household disposable income, when taking out the average-sized loan at the time.

He says Gen Xers have had it easier than both the baby boomers in 1990 and the millennials today.

“And they’ve seen their repayments fall as well as interest rates have fallen over the course of the last 15 years,” Mr Coates says.

Further rate rises will make life even harder for millennials

Mr Coates believes further interest rate rises are on the cards this year.

Like Peter Tulip, he expects the cash rate could lift close to or even above 4 per cent, which would mean variable rates of about 7 per cent — and that will make life much harder for millennials.

He says a key difference is in how much of this burden is interest and how much is principal.

For baby boomers, with relatively modest loan sizes but very high interest rates, almost all the initial repayments were interest.

For millennials borrowing in mid-2022, around two-thirds of the initial repayment was interest — although he says the interest share has and will keep rising as rates rise and prices fall.

That debt burden is even higher for those who borrowed in late 2021, before house prices started to fall.

“The extraordinary increase in house prices and debt means mortgage rates of 7 per cent would be as painful to borrowers today as rates of 17 were decades ago,” he says. 

“Borrowers would start paying 7 per cent mortgage rates if the RBA raises the cash rate above 4 per cent, as some bank economists (such as those at Deutsche Bank) say will happen within the next 12 months.”

He says while rates may start falling early next year, “the real elephant in the room … is the fact that such a large share of people are on fixed rate loans”.

“And so, while they’re looking ahead at the moment and saying they’re going to have higher repayments.”

Total repayments as a share of income rise

Like Dr Tulip, Mr Coates says the struggle to own your home is worse for millennials now than it was for boomers.

“The challenge is that people are going to expect to own those homes and pay off those mortgages for 25 to 30 years,” he says.

“Once you account for how much people are going to be paying over the life of their loan, they’ll certainly be paying more as millennials today than either baby boomers in 1990, or Gen Xers, they probably bought in the mid-2000s.”

He says the other thing to note is that baby boomers saw their mortgage burdens decline rapidly as interest rates fell.

“Borrowers in the 1990s who started out devoting more than 30 per cent of their income to paying off a mortgage found themselves devoting just 12 per cent by the time the loan was halfway through,” he says.

“In fact, the typical boomer was paying a smaller share of their income in mortgage repayments halfway through their loans than Gen Xers that bought in 2006.

But for millennials, with bigger home loans taken out at lower rates, the decline will be less generous, leaving them with higher mortgage burdens for longer, especially when principal repayments are factored in, which Grattan has done in its calculations.

“The typical house price is eight times or more the typical income,” he says.

“Back in the 1990s, you’re talking about people buying homes that were two or three times the typical income.

“And so a millennial is likely to be paying something like one third more in terms of their total repayments on a house as a share of their income than a baby boomer did 30 years ago, just because that load is larger, therefore the debt is larger, and interest rates have just got so much less to fall than what they did back then.”

Taking on a home loan now ‘feels like a life sentence’

RateCity’s Sally Tindall also worries for today’s younger generation.

She says, based on a single person buying a median priced house with a 20 per cent deposit and factoring in the interest rate for new mortgage customers, it’s become harder to service a loan now than it was in the 1990s.

“Taking on a home loan back in the 1990s didn’t feel like a life sentence, whereas these days people are saddling themselves with so much debt, it feels near impossible to pay off your loan quickly,” Ms Tindall says.

“Back then saving up a deposit wasn’t a big hurdle because compared to what they were earning, house prices were relatively low. But for boomers 17 per cent interest rates were the real burden. Whereas these days house prices are a burden and rising interest rates are as well.”

First home buyer grants helped this millennial

Despite the data showing owning your home is now harder for millennials, Oliver Cooksey, 26, broke into the housing market in July.

He says it wasn’t easy, but he made sacrifices to save a deposit and locked in a fixed rate of 4.09 per cent to 2025 to have peace of mind.

“Thankfully, I knew someone who worked at a bank, and they were able to assist me with what options I had to get into the housing market and get a loan,” he says.

The home, in Sinagra in Perth’s northern suburbs, cost $347,500. He put down an $18,000 deposit, which was 5 per cent. The remainder of the deposit came with the help of the government via the First Home Loan Deposit Scheme.

Usually, first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance. But under the scheme, eligible first home buyers can purchase a certain-priced home with a deposit of as little as 5 per cent (lenders criteria apply).

The scheme guarantees to a participating lender up to 15 per cent of the value of the property purchased that is financed by an eligible first home buyer’s home loan.

In addition to that he accessed state and federal first home buyer grants.

“I knew my rate was higher than what people were paying at the time, but … for the next three years, my mortgage repayments are going to stay the same no matter what happens in terms of interest rates,” he says.

His advice for other millennials desperate to break into Australia’s housing market is to focus on buying something they can afford now, rather than something they want for the future.

He also suggests paying off all personal loans so the bank will look at you more favourably.

“The biggest thing that made a difference for me was I printed out all my bank statements, all my credit card statements, looked at all my loans I had sort of cut out any expense that I didn’t need.”

Make ‘sacrifices’ to save a deposit and afford repayments 

Mr Cooksey suggests cutting back on discretionary spending like going out for drinks or to the cinemas.

“Then just reassess what you’re spending your money on,” he says.

“Do you really need that new car? Do you really need that new phone?”

He says while it is possible to move from renting to owning your home, in his opinion it’s harder for young people now than it was for boomers in the 1980s when rates were far higher.

“It’s a lot harder now to be able to save that money to buy a house,” he says.

Despite that, he says he’s working hard to pay off his home loan ahead of schedule.

“I want to pay this place off in 15 odd years, if not sooner,” he says.

While tax breaks for housing advantage investors, Ms Boylett says some younger people buying their first home may have unrealistic expectations about the type of property they can own and in what location.

“My advice would be look outside the box,” she says.

“Instead of thinking, ‘alright, I want my house in the city’, look outside the box, go outside in a regional area … Keep it for four years. And then after four years sell it.

“You don’t need to have everything now because it can happen to you down the track. You can build up buying and selling to move up to where you want to be.”

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