Families are spending close to 40 per cent of their income on home loan repayments as buying the Australian dream gets harder, a report says.

Housing affordability was likely to worsen by mid-year as borrowers struggled to cope with recent interest rate rises, Real Estate Institute of Australia (REIA) president Noel Dyett says.

“Renters and buyers are feeling the fallout from consecutive interest rate rises,” he said.

Home buyers were putting 38 per cent of their family income on their mortgage, the Deposit Power/REIA housing affordability report for the March quarter found.

Housing affordability fell by 8.7 per cent in the year to March, the report said.

Queensland overtook NSW as Australia’s least affordable place to buy a home, with borrowers putting 40.5 per cent of their family income on their mortgage.

Home affordability in the sunshine state fell by 11.2 per cent in the year to March.

Nationally, average rents were swallowing up 24.7 per cent of family incomes in the March quarter.

“There is little prospect that rental affordability will improve in the short-term, particularly noting the downward trend in investor finance in response to recent interest rate rises combined with extremely tight vacancy rates in all capital cities,” Mr Dyett said.

Tasmanian renters were the worst off, needing 29.5 per cent of household income to pay their landlords.

Renting in the Northern Territory was more expensive than buying, with rent eating up 28.1 per cent of income compared with 23 per cent for home loan repayments.

“Darwin rents are the highest in Australia with median rents for a three-bedroom house increasing to $490 per week,” the REIA said.

Average Australian home loans fell by 2.4 per cent during the March quarter to $246,647, the REIA said.

But with the Reserve Bank of Australia raising interest rates in February and March to a 12-year high of 7.25 per cent, home loan affordability worsened across Australia, except in NSW and the Northern Territory.

AAP