Hundreds of thousands have accessed early superannuation as part of the government’s COVID response, but there’s one thing banks aren’t keen on you using it for.
Hundreds of thousands have accessed early superannuation as part of the government’s COVID response, but there’s one thing banks aren’t keen on you using it for.

Customers ‘falling foul’ of banks with early super

Thousands of people attempting to use their superannuation for a home deposit have been knocked back for loans after 'falling foul' of lenders' requirements.

The Saturday Courier-Mail can reveal more than 600,000 Queenslander's have accessed $9.8bn through the superannuation early release program.

Across Australia 4.7m people have raided about $36bn from their superannuation accounts since April when the federal government unlocked the retirement nest egg in response to COVID-19.

Digital Finance Analytics Principal Martin North said there was anecdotal evidence people who pulled money out of superannuation to use for a home deposit had been denied.

"The evidence of saving for a deposit is something that banks look for," he said.

"People who have magically pulled money together for a deposit is not necessarily viewed by the bank as a particularly valuable approach.

"The concept of whipping up $20,000 out of superannuation and using that as a deposit or part deposit on a house is not signalling the behaviour the banks want to see."

 

 

Mr North said the quick access was "probably falling foul" of lenders' internal risk management checks.

He said people who were knocked back by banks could be forced to use another lender which charged higher interest rates.

Mr North said pulling cash out of superannuation to inject into housing was "extremely risky".

"We already have enough of Australia's assets in housing the last thing you want to do is put superannuation into it," he said.

"It's a long-term savings scheme which benefits from interest compounding over 30 or 40 years.

"Raiding it for buying property is extremely risky."

Griffith University Business School Lecturer Di Johnson said in some circumstances people would benefit from putting superannuation into a home.

"That may be the most prudent thing for them to do and the tax officer's criteria was pretty loose," she said.

"But the impact of this COVID-19 recession is not over, it's going to be a long and bumpy road and they may be better off keeping that cash."

Dr Johnson said middle-aged people who accessed their superannuation early were likely to be most at risk in retirement.

"We know a lot of people completely wiped out their super balances," she said.

"If they were close to retirement it would only have been a very small adjustment

"If they're young they've got a longer time to recover but it's an uncertain job market."

Originally published as Queenslanders 'falling foul' of banks with early super


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