Australians spending $100 a month on multiple streaming services could be missing out on a trip to Bali or even a home loan, an expert says.
On Your Own Two Feet founder Helen Baker, a licensed financial advisor and author, said those who pay for Netflix and a variety of other subscription options could be spending, conservatively, $1,200 a year on something they probably don’t even use.
“Often they bundle it into their phone package, so they have phone plus this, plus that… or they have Netflix, the Stans, the Kayos,” he told Daily Mail Australia.
‘There are all these different services and some of them are used seasonally and some of them are not used at all.
‘You get packages of stuff that contain parts that nobody uses, but you’re paying for all of that together.’
Over the course of a year, that $1,200 spent on multiple streaming services could fund a trip to somewhere like Bali.
“That covers all the accommodation and the money for the party – $1,200 probably won’t go far in Australia, but in Asia it will,” Baker said.
Spending too much on streaming services could also hurt someone’s ability to get a home loan.
Australians are increasingly spending $100 a month on multiple streaming services, and that amount is equivalent to an annual holiday to Bali.
That’s because lenders, including big banks, are required to assess whether a potential borrower can afford a mortgage, under laws introduced in 2009 during the global financial crisis.
Ms Baker said big spenders and those with buy now, pay later apps such as Afterpay could potentially be compromising their credit score.
“It’s just little cues they’re looking for about what your behavior is like,” she said.
‘Anything they see that’s significantly risky – like lack of savings, lack of money management, relying on credit card debt, relying on buy now and pay later – they’re concerned that you’ve signed up for these types of services.
‘Why don’t you just use your regular money to pay for those services?’
Banks must also assess whether a potential borrower can afford a three-percentage-point increase in variable mortgage rates.
The Reserve Bank’s cash rate has been raised by 4.25 percentage points in 2022 and 2023.
With inflation high, rates could still rise beyond the 12-year high cash rate of 4.35 percent.
Those who qualify for a home loan also have to pay costly lenders’ mortgage insurance (LMI) up front if they do not have a 20 per cent deposit.
Banks also charge higher mortgage rates to borrowers with a smaller deposit.
On Your Own Two Feet founder Helen Baker, a licensed financial advisor and author, said that those who pay for Netflix and a variety of other subscription options could conservatively be spending $1,200 a year on something they probably don’t even use.
Someone who buys a $500,000 home with just a 5 percent down payment on $25,000 has to pay $14,872 in premiums, Compare the Market calculated.
Those with a 10 percent deposit on $50,000 would pay $8,680, a figure that would drop to $4,713 for someone with a 15 percent deposit on $75,000.
David Koch, economics director at Compare the Market and former Sunrise presenter, said those without access to the “bank of mum and dad” often have few options as house prices continue to rise.
“Some lenders will let you apply for a home loan with as little as 5 per cent deposit, but you’ll usually have to shell out extra for lender’s mortgage insurance – a fee that represents an additional risk,” he said.
Over the course of a year, that $1,200 spent on various streaming services could pay for a trip to somewhere like Bali.
‘With property prices rising by tens of thousands of dollars in some parts of the country, many buyers feel they are being left behind as they try to save up that 20 per cent deposit.
‘Those people might weigh the additional cost of LMI and find that it might be worth it.’
The median home price in Sydney is over $1.4 million, meaning a couple wanting a home with a backyard would typically buy something worth over $1 million.
Those buying a million-dollar home in an outer suburb, with a 5 per cent deposit on $50,000, would pay $39,940 in lenders’ mortgage insurance.
Helen Baker is the author of On Your Own Two Feet – Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce – Your Survive and Thrive Financial Guide.