A new survey has shown a shocking lack of knowledge about the property market among younger Australians.
According to a survey conducted by the super industry’s bank, ME, first home buyers are “clueless”.
ME tested 1,000 Australians who are looking to buy their first home or have already purchased an owner occupied or investment property.
Market pressure bringing down house prices – by as much as 10 per cent in some places – mean more families are making their move in property.
In a stunning example of how some “don’t know what they don’t know”, 70% of the sample survey said they felt confident about making financial decisions and half maintained they understood the property buying process.
ME Head of Home Loans Patrick Nolan said overconfidence and low financial literacy is a “risky combo”.
He said: “It’s difficult enough for those trying to get their foot in the door to save up a deposit and decide where to buy. A lack of necessary property buying knowledge is sure to increase the risk of young Aussies being caught out with unexpected costs, adding to the existing stress.”
Among other findings: 66% of owner occupiers and 65% of investors are unsure of the key things that contribute to the amount of interest paid on a loan, meaning they could be saving more on interest.
The ME bank’s advice:
Do your online research. There are plenty of educational options like the Government’s MoneySmart website and ME’s engaging online school of money, Ed, that can outline the basics and explain all the home buying terminology.
Crunch the numbers. Many lenders have online calculators to help you understand things like borrowing power and what your repayments could look like.
Independent advice. Speak to independent experts like an accountant who can answer all your unanswered questions.
Now you take the test (answers below):
- What does lenders’ mortgage insurance cover?
- Is there a cooling off period when buying at auction?
- When do you pay the deposit if you’re buying at auction?
- What is an offset account?
- What is conveyancing?
Meanwhile, more millennials are opting to save for a home, according to Westpac.
The banks says it has seen an increase in the number of first home buyer loans issued compared to the same period in 2017 and 2016.
Newly released data from Westpac Life, a savings account that allows customers to save for specific goals, shows the most popular savings goal among 25-34 year olds is ‘Home and Property’.
On average 70% of these millennial customers’ total savings is being put away for a future home.
Kathryn Carpenter, Westpac’s Head of Savings, said first home buyers are being diligent with their savings and digging deep to save for a home.
“Millennials are often depicted as a generation more focused on life experiences and living in the ‘now’. However, our research shows that many are in fact taking saving for a home deposit seriously and prioritising it above other goals including travel or lifestyle,” Ms Carpenter said.
1. Lenders’ mortgage insurance covers lenders, not borrowers.
2. There’s no cooling off period when buying at auction.
3. You need to pay the deposit on auction day.
4. An offset account could offset the amount you owe on that loan, and you’ll only be charged the interest on the difference.
5. Conveyancing is the legal preparation of documents for the conveyance (transfer) of property.