Your Financial Questions, Answered: May '19

For us, a home loan deposit is more than just a lump sum needed to get the banks to sit down with you. It actually has a dual purpose: the first being to show that you’re able to save a significant amount of money over the longer term, proving that you’re capable of keeping up with your mortgage repayments. The second is that by investing a 20% deposit you’ll automatically own 20% of your home, which means less money borrowed and less interest paid over the long term.

The Liberal party’s plan is also very new and should be taken with a grain of salt as it’s only a proposal at this stage. The Real Estate Institute of New South Wales has also expressed concerns over how new home owners with a 5% deposit may be treated by the banks in comparison to those with a 20% deposit. There is the chance that those with a 5% deposit may have a different risk profile assigned to them by the banks, which may result in a more expensive interest rate. Considering these factors, we believe that for the average first home buyer, if you’ve managed to save a 20% deposit on a home loan it’s still a smart decision to invest this amount into your future home.

The idea behind the Liberal party’s plan was to help those just like you find a realistic way to break into the property market. The Coalition believes that many everyday families are capable of paying off a mortgage but struggle to save up the significant amount needed for a 20% deposit while paying rent.

However, if this plan is made into law and you’re able to apply for a loan, that doesn’t necessarily mean that you should. It’s important to first speak to your advisor to determine whether buying a home is the right move for your particular financial circumstances. And if you’re struggling to save, your financial advisor can help you reassess your financial situation and design a way to save for your deposit as well as pay off a mortgage.

While in the past 5 years low wage growth has been something of a concern, a recent slight increase in wage growth has indicated that this aspect of the economy is on the rise. Boosted by an increase in the national minimum wage and new bargaining agreements designed to increase job numbers, we think it is fair to say that the recent growth in wages could be a sign that Australia is heading in the right direction.

Technically, yes. According to the Australian Bureau of Statistics, as of March 2019 there were 1,089,300 underemployed people in Australia. Overall underemployed workers represent 8.2% of the workforce. Underemployed workers are also the most likely to be working a second or third job, according to data from the HILDA Survey.

But while this might sound concerning, in truth this number is to be expected as Australia’s labor force grows in size. Professor Mark Wooden – of the University of Melbourne – put it best in an interview with the ABC, stating: “One day the number will be past 2 million, one day it will be past 5 million or 10 million. If the labour force keeps growing, all the numbers will go up.”