Australians who own homes and have mortgages are putting more money in savings accounts than they have in recent memory. As of mid-2013, the average Australian household had tripled its savings account over the previous two years. This information, which was made available through the ING Direct Financial Well-Being Index, may seem promising, but it also highlights the major gap between older Australians and their younger counterparts. After all, first home buyers are struggling more than ever to afford ever-increasing home prices, and many find it difficult – or even impossible – to save up deposits in the first place.
How Aussies are Saving More
The biggest driver behind the ballooning size of many Australian homeowners’ savings accounts can be traced back to the record-low interest rates that have favored the market in recent years. Indeed, rates continue to be low, and many homeowners are wisely taking the money they’d otherwise be sinking into interest and putting it in their savings accounts. At the time of the ING Direct report, the average savings account in Australia was just under $15,500. Low interest rates are definitely making it easier for Aussies to save, but another factor that shouldn’t be ignored is the inevitable rise in those rates. For many Aussies, building large savings accounts is more about having a buffer than anything else.
Homeownership Still Beyond Reach of Many Australians
While many homeowners around the country are amassing nice savings account balances, many others who don’t already own homes are finding it more and more difficult to make homeownership a reality. Unlike their home-owning counterparts, these Aussies often find it difficult or downright impossible to save up the money that’s needed to qualify for mortgages. Most need to put down anywhere from five percent to 20 percent to get their foot in the door, and the lackluster job market, escalating home prices and high unemployment rates are holding them back.
Saving Now is Wise
As nice as it is to have low interest rates for mortgages, it won’t last forever. In fact, many expect rates to creep up slowly but surely over the next 18 months. By saving what they can now, Aussie homeowners can soften the blow when their monthly repayments increase due to higher interest rates. Regardless of people’s reasons for saving, it’s never a bad idea. The bigger a household’s buffer is, and the more financially aware they are the less likely it is to run into trouble affording the mortgage.