Kirsty Lamont

New research from comparison site Mozo has found that 80% of Australians are worried about the economic impacts of Coronavirus, with one in five particularly vulnerable, having no savings as a safety net if they found themselves unable to work. Simply put, many Australians cannot afford to ‘not’ work.

Nearly half of Australians (47%) said they were unable to work remotely due to the nature of their job, leaving them particularly vulnerable if Coronavirus was to escalate further and stricter quarantine measures were imposed. 30% of the population said they were not eligible for sick leave if they were to fall ill. One in four would said they would be personally and financially affected if daycares or aged care facilities were to shut down

“Mozo research has found that Coronavirus is driving a lot of economic worry right now, more so than rate cuts, the bushfires, a depressed retail sector and dropping unemployment. There are portions of Australians who are very vulnerable financially – those who have casual contracts, are unable to work remotely, aren’t eligible for sick leave, have dependents, or don’t have a savings fund,” says Kirsty Lamont, Mozo Director.

“We’re certainly in the thick of uncertain times and worry is a natural response, but remember there are ways to build reserves and avoid going into the red. You need to review your spending, categorise your purchases and look for unnecessary purchases or automatic deductions. This can help you separate the essentials from needless spending. Set a goal, make a budget and then stick to it. Funnel your savings into the most competitive account – the sharpest savings rate currently on the market is 2.00% compared to a market average 0.90%.”

“Mozo research found that only one in four property owners have refinanced, so now is the perfect time to make the move with savings of up to $100k possible by opting for a competitive online lender compared to the big four banks. From the moment you pick up the phone to signing on the dotted line the average amount of time it takes to refinance is five days, meaning that you could pocket $21K a day in savings.”

When asked about their spending habits, 71% of Australians said they would adjust their lifestyle in the wake of Coronavirus, with 39% vowing to spend less money on clothing and leisure, 33% increasing savings, 30% curbing international travel, 20% stopping domestic travel and one in ten taking money out of shares as well as moving money into term deposits.

One in four Australians admitted they had no savings and would be vulnerable if unable to work. 30% said they had a small amount of savings but said they couldn’t afford to be out of work for long while 23% said they were financially prepared but unable to afford being out of work long term.

Mozo’s tips for workshopping your finances

• Research high interest savings accounts online and opt for one of the sharpest providers on the market
• Set up a direct debit to transfer money from your everyday transaction account to your savings account as soon as you’ve been paid.
• Set your goal – knowing how much money you’re striving to save can make progress all the sweeter as you edge towards that amount
• Withdraw cash rather than using a card – this way it’s much harder to spend over a set amount
• Track your spending – many banks now offer apps that track your spending, enabling you to identify unnecessary purchases and watch your savings grow
• Consider refinancing – you could save up to $106k by opting for the most competitive lender on the market compared to the big four

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• Bank of Mum and Dad is Australia’s fifth biggest lender, after the Big 4 Banks
• $92.3 billion lent to children to help them onto the property ladder, with 59% of parents not expecting repayment
• Nearly half of parents cutting expenses or delaying retirement in a bid to get their children on the property ladder, one in four facing financial hardship
• Of parents expecting repayment, nearly 20% reported their child is yet to make a repayment

New nationally representative research from comparison site Mozo.com.au has found that the Bank of Mum and Dad is on the rise, after quizzing Australian parents across the country about their financial contributions towards their children. The study found the total amount lent by the Bank of Mum and Dad is up 41% from when parents were last surveyed two years ago.

With 1.2 million parents across the country providing financial assistance totalling $92 billion to help their children step onto the property ladder, the Bank of Mum and Dad is the nation’s fifth largest mortgage lender, sitting behind the big four banks – ANZ, Commonwealth Bank, NAB and Westpac.

The portion of parents helping their children to buy a home has remained steady between 2017 to 2019, sitting at 29%, however due to an expanding population, the number of parents contributing jumped from 1.02 million in 2017 to 1.2 million in 2019. On average, families lent $73,522 to their children, up $9316 from 2017. This vastly increased the total sum the Bank of Mum and Dad has lent, taking it from $65.3 billion in 2017 to $92.3 billion.

Showing just how far parents will go to help their children onto the property ladder, Mozo’s research reveals that 64% of parents dipped into their own savings for the funds, 16% pulled money from their home equity and 13% delayed retirement .

“The property market in Australia is incredibly challenging for younger generations to break into with property prices surging by 395% in the last twenty five years. For this reason the Bank of Mum and Dad has become an essential player in our nation’s housing market. Loan contributions have grown by 41% in the last two years alone highlighting that the Bank of Mum and Dad will not be closing shop anytime soon,” says Kirsty Lamont, Mozo Director.

“It could be argued that such a dominance in family assistance is feeding into a greater inequality in this country with many first home buyer hopefuls without financial aid remaining locked out as property prices rise faster than they can feasibly save a deposit. Income to property ratios have changed dramatically in the past twenty five years. At present, the cost of buying a property is 7.2 times the annual income of a typical household, whereas 25 years ago it was 1.6 times the annual household income.”

Letting adult children live at home rent free remains the most popular way to assist children with 43% of parents using this as a means of assistance. Providing money for a deposit was the other dominant form of assistance with 32% of parents offering this as a way for their children to get on the property ladder. Other forms of assistance included acting as a guarantor (14%), assisting with repayments (10%), purchasing a property on behalf of children (9%) or buying a property as a partner (6%).

Bank of Mum and dad extends beyond buying a home

Mozo’s research also found that Australian parents are providing financial assistance to their children beyond property endeavours, including contributing towards a vehicle (46%), helping with education costs (39%), paying ongoing bills (33%) and paying for household items like couches and beds (27%) to help their children get on their feet.

One in four parents facing hardship to get their children on the ladder

Nearly half of parents reported cutting back on expenses or delaying retirement in a bid to get their children on the property ladder. While the majority of parents did not expect any form of repayment from their children, one in four reported they were at risk of financial hardship and stress in the face of their contribution. 26% of parents who acted as guarantors reported that their child defaulted on the loan, resulting in the bank calling them and one in five parents who expected repayment from their contribution reported that their child had missed repayments.

“Many parents are feeling the pressure to help their children purchase their first property and for some, this is causing a real strain, especially when they find themselves working for far longer than they’d envisioned or repayment deals are reneged on or. With one in four parents providing assistance are at risk of financial hardship, the path to property ownership is less than rosy for many families,” says Lamont.

“For younger generations hoping to own their own home, it can certainly feel like a dealbreaker whether or not Mum and Dad are available to chip in. While the property market can feel like a large fence to scale, there are ways for first home buyers to save for a deposit independently. From making a concentrated effort to blast debt to looking at first home owner grants in your state and considering re-intvestment, there are ways to make your first home purchase a possibility.”

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Kirsty Lamont

New research from comparison site Mozo has found that a whopping 70% of Australians do not trust the big banks, with half of that number losing confidence after their failure to pass on recent rate cuts. One in four big bank customers have left or intend to move to a non-four lender, equating to roughly 4.9 million Australians.

“Australians are making it crystal clear that they are not impressed with the big banks, with 62% saying the big four are putting profits before customers. The days of bank profiteering are well and truly coming to an end with online and smaller banks offering ultra-competitive rates and minimal fees,” says Kirsty Lamont, Mozo Director.

“Mozo’s latest research indicates that there could be a major shift in where Australians choose to do their banking. Online home loan lenders currently hold a paltry 6% of the population but the tide could be turning, with half of Australians saying they would consider making the move.”

The biggest roadblock for online banks appears to be a lack of knowledge, with 38% of Australians saying they didn’t know enough to make the switch, while nearly one in four felt that an online lender offered no special incentives compared to a bank with a branch. Over 30% of Australians felt they needed to sit down with a mortgage expert to discuss their home loan. 

“It’s understandable that Australians are exhibiting a level of trepidation regarding applying for a home loan online, given it may well be the largest sum of money they borrow in their life. That said, an online lender can easily save you tens of thousands of dollars over the course of your loan as well as offering the same level of security as any major bank. Our research found that nearly 20% of big four customers felt their money was ‘secure’ with the big four,” says Lamont. 

Comparing the most competitive online lender rate against the average big four home loan rate on the market, borrowers could save a whopping $75,000 on a $300k owner-occupier principal and interest loan over a thirty-year period by opting for a competitive online lender.

The big banks sluggish response to the flurry of rate cuts affected the trust of those aged 25-34 years old the most with one in four losing trust after the rate cuts. They were also the age group most likely to move with 46% saying they intended to do so. One in five Australians surveyed admitted they didn’t know enough about the rate cuts to make an informed decision about their banks.

When Australians were quizzed about the benefits of getting a home loan with an online lender instead of a traditional bank, lower interest rates were perceived to be the greatest benefit followed closely by lower fees, however, one in four Australians believe there was no advantage to opting for an online provider.

“Only 19% of Australians believe that the big banks are doing what is necessary to stay afloat in the wake of the rate cuts, leaving a massive 80% unimpressed with big bank behaviour. The writing is on the wall for many borrowers and now is the time to find the most competitive rate on the market and reap the rewards,” says Lamont.

Mozo’s tips for finding the most competitive home loan lender

• Provide your current or potential lender with proof that you can find a better deal by shopping around and comparing rates with different lenders.
• Haggle with your lender for the lowest possible rate. Interest rates may be at an all-time low but this means that competition between the banks is fiercer than ever. Push hard for a good deal.
• Don’t be tempted by an appealing discount. Home loans are about the long game and while a decent discount may save you a lot in the short term, it could work out to be more expensive over the course of decades.

 Key points

• 70% of Australians no longer trust the big banks, half of whom lost faith after recent rate cuts
• One in four big bank customers have made the move or intend to leave, equating to 4.9 million Australians
• Online home loan lenders offer the potential to save $75k over 30 years on a $300k loan compared to average big four bank rate

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