Up to 45 per cent of household incomes to be reduced by pandemic: Comparethemarket.com.au

Up to 45 per cent of household incomes have already been, or soon will be, reduced as a result of Government-mandated restrictions, according to the latest research from comparethemarket.com.au.

Furthermore, the study found that four in five impacted households are freeing up cash by deferring loan or credit card repayments, or accessing cash by withdrawing from their super, term deposits or life savings.

The financial comparison service commissioned an independent, nationally representative survey of 1002 Australian mortgagors.

Respondents were asked if they were losing income due to social restrictions, and what changes they will make to their finances as a result, including their mortgage repayments.

The survey found that 11 per cent of respondents or their partners had lost their jobs, while a further 5 per cent think they are yet to lose their jobs.

In addition, 18 per cent of respondents or their partners had received a pay cut, while a further 11 per cent believe a pay cut is coming. 

Comparethemarket.com.au also asked respondents if they were concerned about meeting mortgage repayments as a result of their reduced income.

Among households who have, or will have, their incomes cut, 71 per cent said they are worried about repayments for the remainder of 2020.

Many lenders are allowing customers to defer mortgage repayments for up to six months in the current climate; however, payments on interest are not exempt.

The survey also asked if respondents have, or will be, freeing up or accessing cash by deferring mortgage or personal loan repayments, withdrawing from their superannuation, breaking a term deposit, drawing on their savings or using a credit card less.

Among the 45 per cent of respondents whose incomes are being impacted, more than four in five (85 per cent) said they have, or would, take at least one of these actions.

Just one in four (25 per cent) said they have or will defer their repayments, despite lacking confidence about meeting their repayments.

The Australian Banking Association has confirmed that deferrals on mortgages and other credit products won’t affect credit scores, so long as individuals were on top of their repayments before the pandemic.

Mortgagors could also consider refinancing their home loan at this time to save money and take advantage of interest rates being so low.

Many lenders are competing for new customers, so consumers could get a much more competitive rate, in addition to potentially accessing greater flexibility and benefits from a different lender.

Among respondents whose household incomes have been reduced, 64 per cent have, or will be, ceasing or reducing their credit card usage, while 77 per cent would also draw on their savings.

Among the other ways Aussies will be freeing up cash, 10 per cent said they have accessed, or will access, their superannuation.

The Government announced a new measure to allow for early access to superannuation to help individuals affected by COVID-19.

Eligible recipients – those who are unemployed, receiving Government benefits, were made redundant or have had their hours reduced by 20 per cent or more – can apply to withdraw up to $10,000 this financial year and a further $10,000 in FY20-21.

 “Hundreds of thousands of people are experiencing financial hardship at this time, with around six million workers expected to receive JobKeeper payments, while many others are uncertain about their financial security. The Government and financial institutions have introduced a range of relief measures to help Aussies under financial pressure, stay afloat during these difficult times,” said Comparethemarket.com.au spokesperson Abigail Koch.

“At comparethemarket.com.au, we have created an informative COVID-19 FAQ Hub to help people better understand how the pandemic could affect their home loans, credit cards, insurances and a range of other household costs.”