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.