Susan Mitchell

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EXPERT OBSERVATION 
A significant number of Australians are embarrassed by their financial situation.
The Mortgage Choice and CoreData’s Financial Fitness whitepaper explores Australians’ attitudes and behaviours towards their finances.
Our research has found that when it comes to their finances, many Australians say they are embarrassed, which may stem in part from their personal debt and overall money habits.
According to the whitepaper research, 34% of respondents say they feel embarrassed by their financial habits. Furthermore, it revealed that 42% of Australians feel embarrassed by their personal debt, and one third hide the fact that they are in debt.
The research gave some insight into how Australians are using their credit cards, with a fifth of respondents saying they pay only the minimum amount on their credit card each month and 11% said they have not paid off their credit card in full for the last three months or more.
The fact that people are not paying off the balance on their credit card each month is worrying. However what is also particularly concerning is the number of Australians who pay only the minimum amount of their balance each month.
This prolongs the amount of time they are in debt as a considerable proportion of the payment is servicing the interest, rather than the balance and is one way consumers feel trapped in a seemingly endless cycle of debt.
The research found that more than a quarter (27%) of Australians spend more than they earn, which may explain why they are racking up personal debt.
These habits may be contributing to the shame and embarrassment some Australians say they feel about their finances. Indeed, the whitepaper reveals that almost a fifth (19%) of Australians say they are living secret financial lives.
This begs the question, are the feelings of embarrassment keeping Australians from taking an active role in managing their money? 
The research suggests this might be the case, as one-fifth of Australians said they often do not regularly monitor their finances.
The problem with avoiding the topic of money altogether is that often, a small problem can snowball into something more serious if it is not dealt with early on.
I encourage anyone feeling embarrassed or ashamed of their financial situation to seek professional help. The reality is you are not alone and there are things you can do to take control of your personal debt, but you need to start sooner rather than later.
SUSAN MITCHELL is the Chief Executive Officer of <a href="https://www.mortgagechoice.com.au/" target="_blank">Mortgage Choice</a>.
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A third of Australians feel embarrassed by their finances: Susan Mitchell

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EXPERT OBSERVATION
The Reserve Bank of Australia (RBA) has again made the decision to keep the nation’s official cash rate on hold at 1.50%.
Despite this, major lenders are beginning to lift the interest rates on a range of their home loan products.
The rate decision was unsurprising as a combination of factors provide little incentive for the RBA board to change the current accommodative stance on monetary policy, which has resulted in the absence of a rate change since August 2016.
On a global scale, major economies continue to experience above trend growth. Domestically, we continue to see price corrections in the Australian housing market.
According to CoreLogic’s Home Value Index the trend of dwelling value falls in the nation’s two largest capitals continues with Sydney and Melbourne experiencing falls of 0.3% and 0.6% respectively in August and national dwelling values fell for the 11th consecutive month, dropping 0.3% nationally.
Furthermore, headline inflation, which is typically a reliable driver of inflationary expectations is currently sitting at 2.1% and the latest data from the ABS found that the unemployment rate is close to full employment.
Despite a stagnant cash rate, the interest rates charged on home loans are rising.
The impact of prudential measures on the cost and availability of housing credit has been undeniable, with a major lender announcing last week it would raise rates on its variable home loan products by up to 14 basis points in a bid to offset rising wholesale funding costs. History tells us that other lenders are likely to follow suit.
Moreover, our data reveals that home loans are taking longer to progress from application through to settlement, as lenders’ qualification criteria becomes more onerous in order to comply with responsible lending standards.
We have found that lenders are conducting a more thorough analysis of home loan applicants’ monthly living expenses, requesting forensic detail on as many as 15 expense categories including clothing, entertainment, medical, transport, education, childcare and more.
Lenders will ask to see a minimum of three months’ worth of spending which allows them to determine an applicant’s ability to service a loan. Some home loan applicants are having to justify their expenses in certain categories and are being told that they need to change their spending behaviour to increase their chances of getting a home loan.
For this reason, I would encourage anyone who plans to apply for a home loan in the near future to review their spending habits and make a personal commitment to get financially fit by educating themselves now on what lenders are looking for.
Looking ahead, I do not expect that lending standards will ease, however out of cycle rate rises may become more commonplace. Anyone looking to buy should seek professional advice from a qualified financial adviser and mortgage broker who can work together to help them put their best foot forward before submitting a loan application.
Susan Mitchell is chief executive officer of Mortgage Choice.
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Susan Mitchell

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