Affordability is becoming a big issue for Aussie households

  • By Zilla Efrat

Cost of living pressures are starting to bite, with new research indicating that concerns about meeting mortgage repayments and paying for regular household expenses like petrol bills are real. And things could tougher if interest rates rise.

“Our latest analysis suggests that the issue of cost of living will be front and centre next year,” says Your Financial Wellness (YFW) co-founder and CEO Alex Hassall.

“We can see from some of the analysis we have already done that many Australian households are increasingly paying more attention to their household budgets. Affordability is becoming a big issue and it’s not just housing.”

The research found that mortgage stress, as defined by more than 30 per cent of income being required to repay a mortgage, will rise from 27 per cent to 42 per cent of respondents if interest rates were to rise by two per cent.

In addition, it found a strong correlation between those who have achieved the dream of home ownership and higher financial wellness and less stress, compared to those still battling to buy their first home.

“We also see a powerful connection between higher levels of financial literacy and financial wellness, because the more financially aware and informed a person is, the more likely they are to be more financially secure and be less stressed about their finances,” he says.

“As we head towards a federal election, issues like housing affordability, the cost of living and financial literacy are major talking points with policy opportunities for the major political parties.”

YFW is a Sydney-based data analytics and financial wellness platform providing cloud-based financial literacy and customer insights to Australian financial institutions.

Earlier this year, it released independent research from 3,000 Australians who answered 100 questions relating to their financial aspirations and socioeconomic situation.

The research found almost half (46 per cent) of Australians experience some form of financial stress, more than half (51 per cent) sometimes worry about meeting normal monthly expenses, one in five (21 per cent) cannot often afford to eat out or go to the movies.

In addition, the research revealed that 27 per cent reported high or overwhelming financial stress and that women experienced higher levels of financial stress compared to men (29 per cent to 19 per cent).

The YFW Index shows that the average financial wellness score in Australia is 6.4 out of 10, with a score of 5 or below showing significant levels of financial stress.

“Those who owned their home reported a financial wellness score of 7.9 compared to 5.1 for renters,” Hassall.

“And with price pressure on households increasing due to emerging factors such as higher petrol prices, what was sobering was that 40 per cent of respondents have less than a month’s salary in savings.”