Addressing Australia’s Housing Affordability Crisis: A Multifaceted Approach

Short answer: from where I sit — assessing home loan serviceability every week across the ACT, Illawarra and Riverina — the affordability crisis doesn’t look like a headline about national median prices. It looks like a widening gap between what buyers can save and what they need to borrow, and a set of behaviours I now see routinely that were rare a decade ago: bigger guarantor loans, longer saving timelines, and buyers stretching further up the risk curve just to get a foot in the door. Here’s what that actually looks like from a lender’s vantage point, not a policy paper’s.

The Deposit Gap Is the Real Story

Everyone talks about house prices. What I actually watch is the gap between what a typical buyer can genuinely save and the deposit a purchase now requires. That gap has stretched noticeably even in markets that look “affordable” next to Sydney or Canberra — a first-home buyer in Wagga or Griffith isn’t competing against Sydney prices, but they are competing against Sydney-level wage growth expectations without Sydney-level wages. The result is buyers taking longer to reach a deposit, and arriving at it with less runway before the loan even starts.

Guarantor and Family Pledge Loans Have Gone From Occasional to Routine

A family guarantee — where a parent uses equity in their own home to help a child avoid Lenders Mortgage Insurance or bridge a deposit shortfall — used to be something I’d discuss with a handful of clients a year. It’s now a genuinely common part of first-home buyer conversations across this whole region. That’s not a criticism of the families doing it; it’s a fairly direct signal that the deposit-saving pathway alone isn’t getting enough buyers there on its own anymore.

The 3% Serviceability Buffer Cuts Harder Than People Expect

Every lender is required to assess your ability to repay at a rate several percentage points above what you’ll actually be charged, to make sure you can absorb future rate rises. That buffer was designed as a prudent safeguard, and I support the intent — but as actual interest rates have moved over recent years, the gap between “the rate you’ll pay” and “the rate you’re assessed against” has meant more borrowers, especially in the middle-income bracket, get assessed as unable to service a loan they could genuinely afford at today’s rates. I see this constantly with dual-income households in Queanbeyan and Wollongong who’d manage the actual repayment comfortably but don’t clear the assessment hurdle.

Government Scheme Uptake Tells You Where the Pain Is

The First Home Guarantee and similar low-deposit government schemes are in strong demand in this corridor, and the demand tells its own story: buyers aren’t short on income necessarily, they’re short on time to accumulate a full deposit while rents and living costs climb around them. These schemes genuinely help the buyers who use them. Since 1 October 2025, the 5% Deposit Scheme no longer caps the number of places or applies income caps, but property price caps still limit where it helps: $1.5 million in Sydney and NSW regional centres, $800,000 in the rest of NSW and $1 million in the ACT.

Regional Buyers Are Absorbing Sydney and Canberra Overflow

Part of what I see locally isn’t just “local” affordability pressure — it’s overflow. Buyers priced out of Canberra or Sydney bring city-level borrowing capacity into regional markets, and that changes the competitive picture for genuinely local buyers on regional incomes. It’s a real dynamic behind price movement in towns like Yass, Goulburn and parts of the Illawarra, and it’s rarely mentioned in the national conversation about affordability because it’s a regional, not a capital-city, effect.

What Actually Moves the Needle, From Where I Sit

I’m not going to pretend I have a silver bullet policy fix — that’s above my pay grade and probably above anyone’s. But from the applications that cross my desk, the things that genuinely help specific buyers are concrete rather than sweeping: low-deposit government schemes (when the purchase falls under the price cap), genuine family guarantee structures set up properly with independent legal advice, and simply having the LVR, LMI and serviceability conversation early enough that a buyer isn’t blindsided six weeks into a purchase. The macro fixes — supply, tax settings, migration — are genuinely important and genuinely outside what I can speak to with authority. What I can speak to is what tightens and loosens at the coalface, and right now, it’s the deposit-to-income gap and the assessment buffer doing most of the tightening.

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Written by Michael Wignall, Lending Area Manager with 30+ years in banking and home lending across the ACT, Illawarra, and Riverina. Got a question or an idea for a post? Get in touch.