In the face of tumbling global markets, RaboDirect’s most recent National Savings and Debt Barometer highlights new concerns that are likely to hit many Australians where they live – literally.
Despite the hard reality of dwindling superannuation balances and an uncertain market outlook, the survey has found that one in five Baby Boomers are still expecting to assist their ‘Kidults’ in purchasing their first homes. At the same time, more than a third of Gen Y (35%) say they can’t afford to buy a house without assistance from their parents – highlighting a significant disconnect between the expectations and needs of the respective generations.
The current drop-off in investment in first homes only serves to add to this uncertain picture. The latest household data shows a decrease in first home buyers since May this year, with the total value of dwelling finance commitments falling 1.4%. While some banks cut fixed-interest mortgage rates yesterday, only time will tell whether this will draw more people into the property market.
Against this backdrop, RaboDirect is keen to highlight that people should properly consider their financial situation before taking on a mortgage. RaboDirect General Manager, Greg McAweeney, said: “With news of sharemarkets tumbling globally, Aussies are rightfully anxious about the stability of their superannuation. Baby Boomers have enough to be worried about without added concerns about dipping into their super to help their kids buy their first home.
“With the first of the Baby Boomers reaching 65 this year and many of them moving into retirement there’s likely to be increasing pressure on parents to dip into their retirement savings to fund their ‘Kidults’ first home. Our concern here is that making such a commitment in an unstable economic environment may simply drive each generation further into debt.
“RaboDirect is urging all generations to think twice before jumping head first into such significant debt, no matter how noble the intention. This is a growing issue and we urge parents and their children to get it into the open and discuss options, and expectations, fully and frankly. If you can’t afford the mortgage, whether you are the parent digging deep in your pocket or as the child you have your hand out for help, consider your options and be realistic about your finances. It could be far more worthwhile for example putting your savings in a high-interest bearing account where you will see your money grow faster. You may not need to borrow from your parents in the end, or need to borrow less, and you will certainly have a deposit faster than you would otherwise. As parents, our gut instinct is to help our children whenever we can but this must be balanced with not jeopardising their own secure retirement.”