Written by Hudson Adviser Michal Park
It’s no secret to my family and friends that I would like a dog. Preferably a small to medium, really cute dog that enjoys being cuddled and will cuddle me back – this is especially important as my three daughters get older and are less inclined to freely hand out hugs like they used to. The dog also has to be non-shedding and non-smelling, and above average in intelligence. And out of all of us, the dog must like me the best.
I know all about the health benefits of owning a pet: increased fitness, lower stress, happiness, decreased blood pressure, decreased cholesterol, etc. According to a 2011 study published in Clinical and Experimental Allergy (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3737566/), kids who grow up in a household with a pet are less at risk of developing asthma and allergies. And perhaps my favourite benefit of pet ownership is that they force us to live in the moment, because that is the only way they know how to live! They may appear simple, but our pets are very wise.
So the health benefits are all well and good, but, I recently found out that owning a pet can impact on your borrowing capacity much like having children can! We should all be aware by now of the stricter borrowing conditions that financial institutions are placing on potential borrowers. Reports that lenders are requesting transaction statements and going through individual expenses are absolutely true. Lenders are doing so to scrutinise how much and how often people are spending on discretionary items (holidays, clothing, Uber eats, shopping etc) rather than relying on the Household Expenditure Measure of old.
Obviously, the increase in the amount of paperwork required has all stemmed from the Banking Royal Commission, resulting in 40% of home loan applicants rejected in September versus only 5% 12 months ago (according to Digital Financial Analytics’ latest monthly household survey).
Money magazine editor Effie Zahos tweeted a few weeks ago about the reported experience of a loan applicant being questioned about a $59 purchase made at a pet store, and why they had not revealed to the bank that they owned a pet. Even though the loan applicant confirmed that they did not own a pet and that the purchase was a gift, the lender still asked for a further 60 days of the applicants transaction statements before approving the loan!
With the cost of owning a pet reported to be approximately $1,335 per annum, and given pet ownership and the amount people are willing to spend on their pets increasing over the past few years, is it any wonder that financial intuitions are now factoring these things into the conversation about home loans? Fur babies indeed.