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There’s been a steady increase in home loan refinancing since April 2022 and the trend is expected to continue, the latest Equifax data has revealed.
More Australians are answering their own financial ‘call to arms’ in the current rising rate environment by taking action on mortgage repayments, improving savings, and enlightening themselves about credit scores — even just what theirs is — according to consumer data analyst Equifax.
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According to the Equifax Australian Credit Scorecard 2022, recent interest rate rises have seen seven in 10 (69 per cent) mortgage holders concerned about not being able to make their repayments or starting to take action about their mortgage and spending habits.
In that context, many mortgagors are taking “immediate action” including considering refinancing their mortgage (27 per cent) and making changes to their spending habits (43 per cent).
The Equifax Australian Credit Scorecard offers insights into the credit habits, behaviours, and scores of Australian consumers, it explained. It combines Equifax analysis on the credit scores of the Australian banking population with consumer research of 1,016 Australians, it stated.
“Many mortgage holders who bought at the top of the market haven’t had time to pay down their loans or build equity,” explained Equifax general manager consumer, James Forbes.
“Depending on how far they have extended themselves, this group is going to be among the first to feel the pinch as interest rates rise.
“As a result, these consumers are looking for levers they can pull to help alleviate their financial strain.
“For example, our data shows that refinancing has surged to nearly 38 per cent of all home loans, and we can see a steady increase from April this year as interest rates started to rise and homeowners looked to find a better deal or fix their loan.
“We expect that trend to continue for some time.”
Despite the hip-pocket pressures, though, the data revealed Australians remain “financially ambitious” in the face of evolving economic conditions, taking “strategic action” to improve their finance and credit standing to “combat an uncertain economy”, Equifax outlined.
Rocky versus Apollo Creed
A sign sure consumers are “determined to come out on top” of the current “economic turbulence”, the scorecard found 69 per cent of Australians remained ambitious when it comes to achieving their financial goals, such as saving for a holiday, buying a house, or paying off debt.
Essentially, Australians are “pragmatically” tackling economic uncertainty, setting financial goals (89 per cent), implementing budgeting techniques (51 per cent), and spending less on discretionary items than they were 12 months ago (37 per cent).
Compared to 2021, half (48 per cent) of Australians are now more likely to save each month, with Gen Z (64 per cent) and Millennials (60 per cent) saving more than older generations, it found.
“Gen Z Australians aged 18–24 have a lower average credit score of 665 when compared to the national average of 846,” Mr Forbes said.
“This is likely due to Gen Z not being active in the credit system for as long as older generations.
“While the lower credit score isn’t cause for immediate concern, as they certainly have time to improve their score, it highlights the need for the younger generations to understand how healthy financial habits beyond saving — such as making repayments on time — can build a positive picture of creditworthiness.
“These behaviours will put them in a better position in the future, when their score will play a key role in helping them take out credit for big life milestones, like purchasing a car or a home.”
Knowledge gap on credit scores
Both interestingly and disturbingly, Equifax also found that despite Australians’ clear interest in improving their financial situation, there are still barriers to achieving financial freedom, with only half (50 per cent) knowing how to access their credit report.
Additionally, 70 per cent of Australians were also found to not be fully aware of all the information included in a credit report.
This ‘knowledge gap’ could hinder consumers’ ability to demonstrate to lenders they are in control of their finances and secure access to credit and highlights the need for continued financial literacy efforts from institutions like banks and credit providers, Equifax highlighted.
Gender attitudes on credit
According to the Equifax data, female Australians have a higher average credit score than males (858 and 836, respectively).
This could be a reflection of different attitudes to finance; a higher proportion of women said they have financial goals (91 per cent) compared to men (88 per cent), while more men (75 per cent compared to 68 per cent women) are using short-term credit and are curious about alternative ways to finance their lifestyle (11 per cent men compared to 6 per cent women), it found.
More promisingly, the 2022 scorecard revealed a “clear interest” among Gen Z and Millennials in protecting their finances, with Millennials more likely than the older generations to say they are more likely to stick to a budget now compared to a year ago (61 per cent Millennials compared to 53 per cent Gen X and 35 per cent Baby Boomers).
Additionally, Gen Z (64 per cent) and Millennials (60 per cent) are also more likely than those older to claim they save more now than a year ago, while Gen X (40 per cent) and Baby Boomers (55 per cent) are more likely than those younger to say their monthly saving habits remain unchanged.
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