The Australian dream of owning a home is more affordable now than it has been for five years following lower interest rates and greater government subsidies, a report says.

The Housing Industry Association and Commonwealth Bank First Home Buyer Affordability index improved by 43.3 points, or 39.2%, to 153.6 points in the December quarter from 110.3 index points for the September quarter.

First home buyers last had housing this affordable in the March quarter of 2003, according to the index.

The Age