Is 2021 the year to get back control of your finances?
Between having to apply for financial assistance for the first time, to spending time with family virtually, Aussies felt pushed to their limit in 2020. But after such a tumultuous year, is the country ready to pick up the pieces and try again?
According to recent ANZ/Roy Morgan research 29% of Aussies say their families are ‘better off’ financially than this time last year, while ANZ-Roy Morgan Consumer Confidence was up by 0.9pts to 112.1 on January 30/31, 2021. There’s some positivity around.
So what exactly is boosting consumer confidence among these Aussies? Let’s take a deep dive by examining some of the most common financial goals for the average Aussie.
Purchasing a home
Despite the fact that property values have officially surpassed pre-Covid levels, it hasn’t slowed down Aussie buyers who are still keen to snatch up their dream home.
Taking a look at the latest lending indicators from the Australian Bureau of Statistics (ABS), the total value of owner occupier home loan commitments rose 8.7% to $19.9 billion in December 2020, 38.9% higher than December 2019.
While it’s hard to say exactly what’s got Aussie buyers amped up, one guess might be the current state of home loan interest rates. If you’ve been following along with the latest home loan news, then you’d know that interest rates have officially fallen below 2%.
And according to Mozo’s Property Expert, Steve Jovcevski it’s first home buyers who will be dominating the property scene in the first half of 2021, taking advantage of these low rates.
“First home buyers will definitely be making a splash this year, thanks to low interest rates and the number of programs out there, like the First Home Loan Deposit Scheme,” he said.
“I predict that during the first half of 2021 we’ll see first home buyers continue to move more in the market, but I expect investors will reappear towards the end of the year, especially if interstate or even international travel resumes. I would encourage any first home buyer to get in sooner rather than later.”
However, while first home buyers seem to be taking advantage of the low rate environment, refinancers are still yet to make their move.
Mozo found that 59% of home owners are not considering refinancing their home loan to a better rate, while 41% are.
“If you are in a position to refinance, now may be your chance as benchmarks have changed amongst lenders,” says Jovcevski.
“One thing to be wary of is that if you were a part of the industries affected during the height of the Covid-19 pandemic, you might find it difficult to find a lender who will service your loan. That being said, it’s best to avoid submitting multiple applications, as it could leave a mark on your credit history.”
Blasting debt and reducing impulse spending
Over the years, our relationship with credit card debt has been complicated. But figures from the RBA in March 2020 found that since the Covid-19 pandemic hit, we’re now taking things a bit more seriously.
The RBA found that Aussies have now payed down an incredible $4.2 billion off their credit cards and that credit card debt accruing interest has fallen by 16% to $22.79 billion, the lowest its been since October 2005.
According to Lamont, this sudden commitment to get debt-free is a breath of fresh air.
“Historically, Australians haven’t been afraid of debt, particularly through our love of credit cards. We’ve racked up debt with the assumption that job security and a steady paycheck is a relatively safe bet, but a global pandemic has tipped that notion on its head as unemployment soars,” said Lamont.
“For many people, Covid19 has been a wake up call to get their finances in order, and eliminating debt is a key part of that.”
Aside from ditching debt, we are also taking control over their spending and are cutting back. Mozo found that almost half of Aussies are making more of an effort to cut back on unnecessary spending.
The result? More to stash in savings.
Building an emergency stash
With spending reduced, many Aussies have been given a new incentive to save.
According to the Rabobank Financial Health Barometer, around 31% of Aussies made the effort to regularly save during 2020, tucking away an average of $978 every month. What’s more impressive is that 90% of respondents now have a savings buffer that could last four months.
“Given that Aussies spent the majority of last year indoors and out of airports, many might have found themselves with a bit more extra cash in their pockets,” said Lamont.
“The good news is, rather than blowing this money on unnecessary shopping, as a nation we’ve decided to store the funds for a rainy day.”
Ready to get your finances in order? Then make your next stop our Life & Money hub, it’s filled with loads of tips and tricks on money management.