When you talk to one of our mortgage brokers about a home loan in Rockingham, Kwinana, Baldivis or anywhere in our neighbourhood, one of the first things we like to do is get an idea of your income and budget. That way, we can not only steer you toward lenders who will give you the right terms for your budget, but also make sure that you don’t overextend yourself and get into trouble later.
When the RBA said in its November statement that savings is near 10% of income, which would be the highest in the current decade, we wondered why the numbers didn’t agree with what we were seeing on mortgage applications.
Superannuation Skews the Statistics
The reason for the gap between what the RBA is saying and what our customers are saying is that the statistics include involuntary contributions to superannuation funds as savings. While they count as savings for the long term, they don’t provide liquidity or availability for mortgage repayments or consumption.
The Real Numbers
When the numbers are redone without counting contributions to supers or any extra payments on mortgages, Credit Suisse computes the average savings rate to be minus 3.6%. In other words, there isn’t nearly as much money floating around as the RBA says there is.
What It Means
While many in the financial industry have bemoaned the “fact” that Australians are being conservative with their money, the truth is that people aren’t spending as much money because they don’t have it to spend. Many households are actually living beyond the means their income would normally provide, using credit to make up the difference.
Will the Housing Market Come to the Rescue?
Some economists are waiting for the housing market to rise, thus providing home owners with more equity and a higher net worth while raising consumer confidence.
What We Recommend
Keep a close eye on your budget and don’t spend beyond your means. If you own a home, take advantage of low interest rates to refinance your current loan. If you are buying a home, have a qualified mortgage broker find you the right terms on a home loan for your Baldivis, Rockingham or Kwinana house.
Call (08) 9527 1800 for more information.