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According to Bernard Salt 18 per cent of 25 to 29 year olds are still at home and they are predominantly middle-class. In fact in more affluent suburbs in Melbourne and Sydney it’s around 50 per cent. And the word is the baby boomers don’t mind at all. One theory of Dominic Thurbon’s, the managing director of gen Y consultancy the Centre for Skills Development, is that parenting styles-more similar to friendships, is one factor that has enabled this trend. This may be well and good, but the concern is the lack of financial literacy the ‘adultescents’ are developing. What happens when they leave the nest and hit the real world of financial responsibility, especially in the tougher times we are now facing? Some parents are changing the status quo given the current economic climate and this is good news for gen Ys. Encouraging financial responsibility ahead of tough times will hopefully stand gen Ys in better stead for the future.

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Predictions of an aggressive interest rate cut by the RBA could see rates drop as low as they were in 1960’s. In early 1960 the cash rate was at 2.9 per cent and debt futures markets are predicting a drop to 2.75 per cent by Easter next year. At the moment the current cash rate is 5.25 per cent. ABN Amro chief economist Kieran Davies said a shrinking Australian economy, falling asset prices and recession-like levels of business confidence will make the RBA more inclined to cut rates aggressively. This will be the biggest rate cut since April 1990 when the Australian economy was about to enter into recession. The rest of the world is set to experience very low rates as well, including the Chinese economy which is slowing sharply.

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One of the UK's biggest lenders, Abbey, is launching its own First Home saver account following the recently launched First Home Saver account scheme that the Rudd government introduced in October this year. Abbey's new first home saver account is aimed at those aged between 16 and 35 who are trying to save up for the deposit on their first house. Abbey is offering an eight per cent variable rate with no withdrawals and the account holder must attend a mortgage interview at the completion of the account, though they’re not locked into taking a mortgage with Abbey. Abbey’s focus is on rewarding those who save for a deposit to help re-establish the link between savings and a mortgage, however unlike the Australian accounts, UK savers do not get bonus money from the Government.

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It seems the financial crisis has put an end to the days of easy credit. Banks are pulling in the reins, tightening lending criteria and making it harder for home buyers to get a loan. In the wake of the global crisis, the Commonwealth Bank has gone as far as banning no deposit loans. According to Aussie Home Loans boss John Symond it signals a return to sensible lending practices and it appears banks are taking this seriously in the wake of the American sub prime disaster.  Banks in America were left billions of dollars out of pocket due to loan defaults, and in Australia, banks are making sure only those who meet the eligibility requirements are getting a loan. It’s a return to more prudent lending for Australia and a tougher ride for those wanting a loan for a home.

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