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Research points to the need to help people become homeowners, responsibly

Report commissioned by Your Financial Wellness with support from Teachers Mutual Bank Limited identifies factors that influence financial wellness in Australia.

26 July 2021

A landmark report has found home ownership to be the single most important factor impacting a person’s perceived level of financial wellness. Further, it has found that the ability to repay debt and save money can have a profound impact on financial stress.

The report, commissioned by Your Financial Wellness with support from Teachers Mutual Bank Limited, uses the Your Financial Wellness (YFW) Index to identify and explore the socio-demographic factors that influence financial wellness in Australia.

The average score of those surveyed who own their home outright was 7.9 – the highest average score of any variable analysed in the report. According to the report, a YFW index of 6.4 (out of 10) represents ‘average’ financial wellness, while scores below 5 indicate significant levels of financial stress.

While people renting a home returned much lower financial wellness scores than homeowners (5.1), the journey from renting to home ownership does not appear to be a linear one. 

People looking to buy their first home received an average index of 6.7, most likely reflecting optimism of looking to buy with the safety-net of a deposit. But once people find their dream home, their financial wellness drops to 6.3, most likely reflecting the pressure that comes with making repayments.

Teachers Mutual Bank Limited, CEO, Steve James said: “The findings of this important report point to the role that financial institutions must play in supporting their customers to take that much desired step into home ownership in a responsible and considered way.

“We’re proud of the initiatives we have undertaken at Teachers Mutual Bank Limited to support our Members on their journey to home ownership. This includes our participation in the implementation of the Federal Government’s First Home Loan Deposit Scheme (FHLDS), as well as overhauling our home loan portfolio to make our products easier to understand and adding benefits such as a reduced variable interest rate for essential workers.”

From the 3000 people surveyed, those struggling to repay debt received a YFW Index of just 3.6, while those who said they were ‘just managing’ received 4.1, with those ‘easily managing’ jumping to 7.1. Those with no savings received a YFW Index of 4, while those with 1-2 months savings jumped up to 6.9. Alarmingly, 40% of respondents have less than a month’s salary in savings.

Speaking to first home buyers looking to enter the hot property market, Steve James said: “First home buyers looking to enter the market need to adequately prepare and save for the purchase of their first home. While support such as the FHLDS can provide a great help in removing the cost of Lenders Mortgage Insurance, it is important to remember the other additional costs that come with purchasing a property and moving, such as stamp duty, removalist fees, electricity, gas and internet connection, home and contents insurance.

“Further, your first home won’t be your home forever. It may be helpful to think about the potential re-sale value it has in the future. Consider things like travel distances, proximity to transport, retail, and schools that may be of value when looking to sell the property down the track,” said Steve James.

A wide range of areas relating to personal finance were measured by the report. Overall, it found that almost one in two (46%) of Australians experience some form of financial stress, while half (51%) sometimes worry about meeting normal monthly expenses.

Read the report