Till debt do us part

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Research reveals financial freedom not a reality for many Australians

Almost half of Australians won’t pay off their mortgages before they retire, a nationwide debt and savings survey by RaboDirect, Australia’s online savings and investments bank, has found.

The National Saving and Debt Barometer found 49% of respondents with a home loan would be 60 or older before they had finished paying it off and more than two in five of those people aged over 40 have 20-plus years outstanding on their home loan.

The National Saving and Debt Barometer surveyed more than 2,000 financial decision-makers aged between 18-65 years across Australia on their attitudes and behaviours towards debt and savings in October 2010.

The survey found that three quarters of those who are likely to take their home loan into retirement are concerned they may not be able to sustain their standard of living through this period. More women (54 per cent) were concerned about this than men (41 per cent), the survey found.

“What we are seeing is a significant proportion of Australians who will carry their mortgage into their golden years, a time when they should be financially free and enjoying themselves. This significant household debt becomes a legacy of their lifetime of hard work,” RaboDirect General Manager Greg McAweeney said.

“It reflects a picture of hard-working Australians with their heads down, not seeing the future potential impact of ballooning personal credit card debt, insufficient budgeting and inefficient savings.

“Consumers need to understand the full financial picture; get back to basics such as setting a personal budget and a regular savings plan; and think twice before spending on the plastic.”

Consumers should also be regularly checking that key financial products, such as mortgages, transaction and savings accounts, insurance and any credit facilities, genuinely suit their needs and offer the best value.

“About half of those who responded to the survey think low-interest ‘transaction’ accounts are ‘savings’ accounts. This highlights that we’re in the dark when it comes to financial foresight. If you were to move your funds to a high interest savings account you could earn valuable interest that can be used to pay off that burdensome mortgage,” Mr McAweeney said.

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