Most Australians dream of owning a home, but the vast majority of those yet to buy admit to not understanding how financial products like home loans work.
UBank's bi-annual Know Your Numbers survey found the majority of non-homeowners (84%) said they need to know more about financial products such as home loans, interest rates and deposits.
The survey of over 1,000 Australians found just over half (51%) of those surveyed admitted to having little to no knowledge about loan-to-value ratios (LVR) or knowing what the term even means (40%).
That number rose to seven in ten (70%) of Gen Z who said they have 'little to no knowledge' about LVRs, more than Baby Boomers (55%) Millennials (46%) and Gen X (42%).
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers.
UBank CEO Philippa Watson said while there is a clear knowledge gap, the pandemic has encouraged many Australians to become more financially literate.
“Many customers come to us in search of ways to simplify their finances, particularly after the events of the past year,” said Ms Watson.
“One of the ways we can help them is to debunk the very common misconception that finance has to be complicated, because we truly believe every Australian should have the ability to understand and manage their finances.”
On the other hand, three in ten (31%) of Australians say they know a lot about refinancing, with 12% saying they have a 'perfect understanding'.
Additionally, one in four (24%) say they know a lot about comparison rates, while one in ten (10%) have a perfect understanding.
“We know the appetite for home ownership is continuing to grow, with 56% of Aussies excited about the prospect of owning a home, up 13% since July last year," Ms Watson said.
“But knowledge is key and entering the property market with little to no knowledge of some essential financial terms and concepts could see Australians falling into common traps or getting themselves into situations they cannot manage."
Perhaps unsurprisingly, Baby Boomers are significantly more likely to understand how negative gearing works, with 34% saying they know a lot about it, compared with 25% of Gen X, 18% of Millennials, and 9% of Gen Z.
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