This article is from the Australian Property Journal archive
AUSTRALIAN home owners feel they are financially unprepared to deal with life's curveballs, according to new research from the Commonwealth Bank.
According to the CommBank Flexible Home Loan research, the reason Aussie home owners feel unprepared is that they have not built enough flexibility into their finances to accommodate major life changes.
Almost a third (31%) feel they do not have sufficient savings to cover the cost of a big surprise, while one in five (22%) feel their significant monthly household expenditure makes them less prepared, and over one in 10 (13%) feel they simply can’t access funds quickly enough to deal with the unexpected.
With the average monthly mortgage repayment accounting for 34% of the average Aussie household income and more than 85% of Aussies said they would like to have greater flexibility with their home loan in the event of financial hardship.
Commonwealth Bank general manager home loans Clive van Horen is encouraging mortgage owners to consider switching to a flexible home loan.
“With home loans accounting for a large proportion of fixed household expenditure, we know the importance of offering our customers a home loan that can roll with the punches. That’s why we’re encouraging all Aussies to consider switching to a flexible home loan that allows them to redraw if they need to cover expenses quickly in an emergency, and to reduce or pause their repayments if they are ahead on their repayments and their financial circumstances change.
“Likewise for home owners doing renovations or changes to their home, it’s good to have the ability to top-up their home loan,” he added.
“In periods of unexpected financial hardship, we often see people immediately defaulting to alternative and potentially more expensive sources of credit simply because they don’t have the knowledge of what else their home loan can actually provide.
“But with a flexible home loan, customers can get timely access to additional funds through top-up or redraw facilities. Conversely, people’s financial situation can change unexpectedly for the better. In these situations it is possible to make additional payments against most loans at no extra cost, saving you money down the track. With a flexible home loan, home owners have more options than they realise,” van Horen said.
The research also revealed which of life’s unexpected events cause the most financial hardship, with the majority of Aussie homeowners agreeing that divorce and the loss of a job would be the surprise with the greatest financial impact (74% for each).
Furthermore, most Aussies are unprepared to deal with unexpected events in the household, such as a sudden reduction in household income (51%), followed by 43% for work (e.g. relocation interstate); 39% for personal health (e.g. being diagnosed with a serious illness); 39% for family e.g. surprise pregnancy); and 23% for home (e.g. emergency repairs
).
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