Following the program which aired last week, Nine also posted an extra segment on the housing/mortgage sector, in which my comments are summarised quite nicely.
By the way, ABC Media Watch is likely to discuss the 60 Minutes programme tonight.
60 Minutes “Extra” Housing Segment
Martin, let me compliment you on that piece – it was extremely well said!
To pick up on the debt element, I think that there needs to be greater efforts at exposing people to what is being said at the Royal Commission – not just the sensational material, but the underlying reality of especially the banking system.
The average Australian would benefit incredibly by hearing Council Assisting talk to bankers about their Sales targets and bonuses for meeting those targets.
I have been saying since I became involved in this issue that somewhere along the line Australians have forgotten that when applying for a loan they are actually sitting opposite a sales person.
They wouldn’t dream of listening to the car salesman when he/she tells them that they can buy the most expensive car on the lot, because, well, of course they are going to say that. (Well, we never used to – now, with the housing ATM, many probably will listen to that car sales person.) It is clear that for quite a while many Australians, foolishly, have taken it as a boost to their ego and a status symbol how much credit a bank will extend…
And while I am writing, I just wanted to touch on one more way in which elevated house prices and the effects of higher levels of debt for longer, and postponing major life events, has increased flows to the entire financial services industry… We are just receiving our annual insurance reviews and boy do you need to be sitting down when you read those… We established our life, tpd, trauma and income protection policies 2 years ago and premiums have increased around 20% at each review! (Yes, they are stepped.) In the first year the policy premiums were around 5.7% of our post-tax income (including super guarantee less contributions tax) – already the premiums have reached 7.8% of our post-tax income – even while ratchetting back insured amounts for life and tpd reflecting fewer working years remaining. At this rate our premiums will reach 10% of our total income in 2-3 years (if we have the good fortune of growing income at the rate of recent years – far from guaranteed with another round of staff cuts in the offing)!
When home and contents, car and health insurance is included, the proportion of all of our post-tax income, including super contributions, is already at 12% !!
I’ll bet my bottom dollar many being squeezed by mortgage stress for all of the reasons you mention, Martin, will roll the dice and underinsure or drop insurances all together…
And, concerningly, some will rationalise, from what they have heard from the Royal Commission on how insurance companies deal with some claims, that it is not an entirely imprudent decision…
Yes stress leads to households dialing back on insurance and health cover, putting more on credit cards, and the rest. Its a systemic issue…