Kochie's brutal message to Baby Boomers
David Koch has shared his brutal thoughts on the housing crisis and rising interest rates, claiming millennials have been dealt the "short end of the stick", while boomers have been spared.
The former Sunrise host, who is now the Economic Director at Compare the Market, said young borrowers are copping the brunt of rising interest rates and soaring inflations.
“If you bought your home in early 2022 under the pretence that interest rates would stay low for longer, you’ve now been lumped with the short end of the stick,” Mr Koch said.
He went on to say young people had difficulty generating any decent savings due to record rental prices and cost-of-living, and those that can scrape together a deposit on a home now face onerous interest charges.
Recent data from Compare the Market found homeowners who bought their homes at the peak of the market in early 2022 were far worse off compared to those who bought three years earlier.
Those who also bought property before the Covid lockdown have also benefited from a rise in their equity, as property prices have significantly increased over the past four years.
Kochie said the repayment hike as a result of rising interest rates was a "tough pill" for young Aussies who had no time to accrue a strong savings buffer.
Given these factors, Kochie said many Aussie baby boomers have been spared the pain of rising interest rates.
"Meanwhile, a lot of mature Australians have missed this pain altogether after selling their properties at the peak and having reaped the benefits over more equity for years," he said.
"A lot of mature Australians have been shielded from the rate rises, and it's already widely believed that their spending drove inflation."
A recent report from CommBank iQ found that baby boomers spending on luxuries appears to be further fuelling Australia's inflation crisis as millennials are forced to cut back on essentials.
This goes a long way to explaining why the current cycle of interest rate rises are not dampening inflation as expected, as the new big spenders are older people who own properties outright and are therefore unaffected by rate rises.
Boomers are are going on holidays and dining out more often, while millennials, battling higher rents and mortgage repayments, rare being forced to reduce their spending to cope with the worst cost of living crisis in a generation.
Koch said, "It's time policy-makers should be asking: how could the pressure be more evenly spread?"
Aussie baby boomers have long claimed that they had to make the same sacrifices when they were buying their first homes, given the home loan rate in 1989 to 1990 was at 17 per cent, compared to today's six per cent variable rates.
However, Kochie debunked this claim, saying current house prices are far higher when measured against average salaries, and that level was only accelerating, far outpacing wages growth.
"Back in the 80s, the average cost of an Aussie house was $70,000, now it's $700,000 - ten times more expensive," he said.
The financial guru explained how in the 1980s the average salary was $19,000, compared with $94,000 in 2023.
"So in the 80s, the price of a house was four times the average person's income," he said.
"In 2023, it's eight times the average Aussie salary."
Kochie urged mortgage holders hit with higher repayments to call their banks and explore whether refinancing to a lower-rate loan is possible.
"We urge people in mortgage pain to reduce the interest on their repayments as much as possible by shopping around for a better deal," Koch said.
"When every dollar counts, 2024 should be the year of the new lender."
Image credits: Compare the Market