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Michael Sill
Michael Sill, Mentor Education

Australians Still Have Low Financial Literacy

11 June 2015
financial literacy
Many Australians have limited knowledge of
how mortgages work

A recent survey has found many Australians have low financial literacy; don’t understand how mortgages work or how the RBA cash rate affects them.

The survey conducted by super fund-owned bank ME of 1000 people found that almost half of Australians admit to being uninformed about the mortgage market. Furthermore, 40 per cent of survey respondents did not know the right cash rate and how the cash rate affects mortgage repayments. Seventy per cent of 18 to 29-year-olds said they did know the cash rate.

Patrick Nolan, ME’s head of home loans reiterated the importance of the cash rate because of its significance in driving variable mortgage interest rates. While the RBA sets the cash rate, Nolan says there are other significant contributors to consider such as “the lenders’ cost of funding of the mortgages and competition between lenders.” Nolan says that, “financial literacy is a valuable asset and one of the biggest money savers over time.”

Reflecting on the results of the survey, Nolan was “surprised that older generations – those who typically have more exposure to home loans – have low levels of home loan literacy.”

Late in 2014, ASIC expressed their concern about low levels of financial literacy and released its National Financial Literacy Strategy 2014-2017, aimed at improving the financial literacy of Australians. ASIC’s ongoing focus has been to improve the financial literacy of Australians by compiling the key priorities for action after consultations with over 200 stakeholders so ordinary Australians become more financially secure.

Comment;

  • Greg
    June 11, 2015 at 1:24 pm

    How about people like my wife and me? We had absolutely NO financial literacy. A financial planner (from the Commonwealth Bank) sold us what we believed was a 100 per cent medium risk investment. It wasn’t until 10 months later that we found the investment was 60 per cent high risk. We are victims of fraud. The fraudster is still operating as a financial planner. Section 52 of the Trade Practices Act prohibits corporations from engaging in conduct in trade or commerce which is misleading or deceptive or is likely to mislead or deceive. It makes no difference whether the business intended to mislead or deceive you—it is how the conduct of the business affected your thoughts and beliefs that matters. The conduct of the Commonwealth Bank affected our thoughts and beliefs to the extent that we thought and believed we had bought a 100 per cent medium-risk investment. We’re trying, through the Commonwealth Bank’s Open Advice Review Program, to get compensation.

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