Inflation bigger concern than mortgage debt

The rise in the cost of living is a number one financial worry for Australians, according to 61% of respondents participating in a survey of 1,018 Australian mortgagors commissioned by financial platform Money.com.au.

The same study also found that nearly half (48%) of Aussies said they would expect to have significant challenges in meeting their expenses and debt repayments this year.

Number two concern for the respondents was having a financial buffer in case of an emergency, according to 43% of those who participated in the study.

Having enough cash flow to pay bills ranked third, and was chosen by 39% of respondents, while meeting healthcare costs and private insurance, and being able to afford non-essential spending ranked an equal fourth, with 36% of respondents choosing these as their largest worries.

Following this, having adequate cash and assets to retire with ranked fifth, chosen by a third (33%) of mortgagors, while the ability to meet mortgage repayments amid interest rate increases ranked sixth – chosen as one of the top concerns for 27% of respondents.

Also, paying off other debt, such as credit cards, personal loans and car loans, ranked seventh and was chosen by 22% of respondents.

Helen Baker, licensed financial adviser and spokesperson for Money.com.au, said: “It’s surprising to learn that mortgage repayments are not as big a concern across the board as rising prices – but there is potentially a combination of factors behind the data.”

According to her, the finding suggested that many mortgagors were likely to have built a buffer in their offset accounts or on their loans to weather rate rose – even though 43% of respondents didn’t have a separate buffer for other emergencies.

Additionally, mortgagors had some faith that  institutions such as the RBA would not raise rates to a level that will create a crisis among a large proportion of borrowers, and potentially a housing market crash and, some borrowers did not monitor financial news or may not be as financially savvy as others, might not be well versed on the ins and outs of their home loan, and may not understand that in an environment of high interest rates they may not be able to meet repayments, Baker said.

The study also asked respondents whether the measures announced in the Federal Budget earlier this year would help reduce their financial worries and a half (49%) revealed it would, but only in the short term, while a third (36%) believed the measures would not ease their concerns, suggesting Government stimulus was still coming up short.

“Unfortunately, the short-term stimulus put forward by the Government is not enough to effectively impact the finances of those who are struggling this year. Increasing inflation and interest rates point to a need for long-term solutions that allow Australians to protect their financial security,” Baker added.