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Mortgage brokers Tracy Kearey from the Mortgage Advice Bureau and Sarah Sakora from On Point Home Loans have said it is likely that some current mortgage customers are considering delaying having children as the cost of living increases and loan serviceability becomes more difficult.
Australia’s CPI rose 6.8% in the year to February 2023 according to the Australian Bureau of Statistics, down slightly from an annual inflation peak of 8.4% measured in December 2022.
Rising costs have led to increasing financial problems for Australians, with NAB’s recent Financial Hardship report finding four in ten people are currently facing some form of financial difficulty.
Rising inflation has seen the RBA make an aggressive series of interest rate rises since March 2022, which while seeking to contain inflation is also making servicing mortgages more expensive.
A Compare the Market survey conducted in January revealed that 16% of Aussies were responding by saying they wouldn’t have kids or would delay having them as a result of the cost of living.
The generation most likely not to have or delay having kids was Gen Z (41.7%), followed by Millennials (28.1%), while 16% of respondents said they never initially planned to have kids.
“As a broker you always ask about the future plans of your customers, whether it be future careers, wealth ambitions or family aspirations. When it comes down to making sure they have the best product or lender these discussions play a big part,” Tracy Kearey said.
While Kearey said customers don’t always have their plans completely thought out when they are applying for finance, they usually fall into one of two extremes – they either have “no plans at this stage” to have children, or are planning to have them “in the near future”.
“The reason for this is that customers know that their lifestyle and the cost of having children is going to change their lives significantly, so they are either not ready to think about it, or they have got to the stage in their life that they are ready to commit,” she said.
Kearey said the rising cost of living could be causing brokers’ customers to delay having children.
“The rising cost of living is a concern for everyone. The current economic conditions may impact the decision whether to have children or not, but I believe it’s a discussion about whether to have them ‘right now’, as opposed to not having them at all.”
On Point Home Loans’ Sarah Sakora, who works in a team of women brokers, said she believed it was becoming a significant problem for many young people thinking about their future.
“Owning a home, travel, and taking time out from their career are becoming things they see as a barrier towards the decision to want a start a family or think about having children at all.
“I'm unsure in the future they would rule having children out, but in today's current climate, we can see many women and couples delaying starting a family due to the pressure to own a home first, to have a stable base to raise a family. And we can all relate to how hard this goal is to achieve.”
Loan serviceability requirements have become more onerous as interest rates have risen, and the costs of having or raising children is having an impact the ability of borrowers to gain finance.
“When you add the standard 3 per cent buffer on top of the interest rate when assessing their loan affordability and then include the rising cost of living, customer’s borrowing capacity has been reducing since May last year,” Kearey said.
“As childcare and school fees are also increasing, I see a lot of customers making spending behaviour changes to ensure their children continue to get the best support they can give.”
Sakora said the cost living increases across all aspects of outgoings - including childcare, private schools and private health - were having a major impact on loan serviceability.
While not providing advice, Kearey said she does help customers in these situations by asking them whether they have thought about certain options that they may not have considered themselves.
“I’m still surprised how many families don’t do budget planning,” she said.
“While not a lot of people put everything on paper and live to a plan, I always like to talk to them about cashflow. Self-employed people understand the importance of cashflow and I find it helps my customers think of the impacts of how they will be best to handle increasing expenses.”
Sakora said because the On Point team all have children, “we fully understand the challenge of balancing, work, income, spending, time with and away from our children and what works for each family's unique situation. And also, the costs of raising children.
“It's important for those planning to have a family to have a safety net - an amount of savings to support taking care of young children. We like to help our clients have a good understanding of their in and out goings and encourage them to be in control of their financial situation.”
Compare the Market General Manager of Money, Stephen Zeller, said the company’s survey figures on attitudes to having children show just how many households are doing it tough right now.
“There could be a multitude of reasons why people are deciding not to have kids like climate change, overpopulation, career opportunity and independence – but money tends to be a denominating factor,” Zeller said. “It seems the RBA’s record run of interest rate rises is sapping the money out of many people’s wallets. Between that and the exploding prices of fuel, energy, gas and groceries – it’s an expensive time to be alive, let alone take care of another person financially.”
However Kearey said that, having been in the industry for a long time and having seen a series of cycles, we should expect that while any changes in the economy will slow activity and increase nervousness, it always settles. “People get used to the ‘new norm’ and then activity, confidence and decisions about having children returns to normal,” she said.
Have you come across mortgage customers debating whether they can afford children or not? Share your thoughts on this topic in the comments section below.
