The annual consumer sentiment survey conducted by the Mortgage Choice franchise, Australia’s leading mortgage broker, has found consumer sentiment for 2007 is mostly positive with interest rates remaining the biggest concern.
In the independent online survey conducted by the financial services franchise in November, 61.9 per cent of New South Wales respondents believed Australian economy will be strong in 2007. Nationally, this was the belief of 68.8 per cent. Compared to the other states NSW was the least confident, possibly due to the so-called ‘two-speed’ Australian economy. The most confident state was Queensland, at 76.6 per cent.
Mortgage Choice National Corporate Affairs Manager, Warren O’Rourke said the outcomes of the nationwide survey provide an interesting insight into the general public’s expectations of and plans for the future, especially in terms of property investment.
“Overall, there has been no significant swing in Australians’ perception of their financial future. Sentiment dropped only slightly and interest rates and petrol prices remain the top two concerns for the state. Consumers continue to have a positive outlook on property and their finances,” he said.
“With housing loan approvals still very healthy, though at a more reasonable pace, the results indicate this trend should continue with almost one third of NSW respondents - 31.7 per cent, compared to 35.1 per cent nationally - planning to invest in property in the next 12 months”.
Concern over the stability of interest rates and petrol prices remain at the forefront of NSW consumers’ minds, with 45.8 per cent citing rate increases and 15.3 per cent citing petrol prices as the biggest concerns for their financial future. Job security came in third at 11.9 per cent and a fall in housing prices garnered the smallest amount of concern at 10.7 per cent. The state most concerned with rate increases was South Australia, at 55.8 per cent while the least concerned was Western Australia, at 43.6 per cent.
The vast majority of NSW respondents believe a rate rise is imminent, with 83.0 per cent saying interest rates will rise in the first quarter of 2007. This compared with 86.3 per cent nationally.
“That is a lot of people expecting higher repayments on their mortgage, even after the three rate rises of 2006,” Mr O’Rourke said.
“Interestingly, the perceived affordability of further rate increases is mixed, with 19.2 per cent of respondents stating that they would not be able to afford any increase. Nationally, 16.5 per cent were in the same boat”.
In response to this question - ‘what is the highest rate rise you could afford to meet repayments on’ – 20.9 per cent could afford a 0.25 per cent increase, 18.8 per cent could afford a 0.5 per cent increase, 8.8 per cent could afford a 0.75 per cent increase and a significant 32.2 per cent could afford a 1.0 per cent increase.
NSW had the most borrowers who could not afford an increase with Victoria following closely at 19.1 per cent. WA had the fewest who could not afford a rise, at 9.2 per cent.
Considering the general consensus amongst economists is that if rates rise within the next six months it won’t be by more than 0.25 per cent, it seems most NSW borrowers can afford to continue paying their mortgage without needing to reassess their budget or loan.
The majority of NSW respondents believe housing prices will remain stable (33.9 per cent compared to 34 per cent nationally), 22.9 per cent thought they would increase in value (33.5 per cent nationally) and 32.4 per cent predicted a decrease (23.1 per cent nationally) while 10.7 per cent were unsure.
It is not surprising that WA had the most respondents say housing prices would increase (44.5 per cent), having spent the last few years caught up in a housing boom, while NSW was the least optimistic.
As mentioned earlier, the number of NSW respondents planning to invest in property in the next 12 months was positive at 31.7 per cent - with that percentage broken down into 18.2 per cent buying an investment property and 12.5 per cent buying to owner occupy. Although it was the state with the least number of people planning to buy, it still compared well with the national figure of 35.1 per cent. WA respondents were the most likely to purchase, at 40.0 per cent.
When asked if they were making sacrifices in order to purchase the answer from 72.8 per cent was ‘yes’ (74.9 per cent nationally). 36.9 per cent will cut back on spending, 8.7 per cent will remain in their current job, 4.9 per cent plan to purchase a less expensive property than they desire, 4.9 per cent will take on an additional job and 4.9 per cent have or will move back in with their parents/in-laws to save on rent.
“For many Australians, investing in property is still a strategy for building their financial portfolio,” Mr O’Rourke said, “and making sacrifices is an accepted part of that.”
“In the current climate, borrowers should consider property investment as a long term strategy especially now price growth is slower. For the long term, there are many Australian regions where good gains can be made if buyers fully research the strengths and weaknesses involved.”
Of the respondents who owned property, many of the 69.3 per cent not planning to buy in the next 12 months will instead renovate existing property, with 27.3 per cent saying this was the case.
Another popular financial portfolio growth strategy is buying shares, with 42.6 per cent planning to invest in these during 2007 (37.3 per cent nationally). 18.5 per cent will invest in addition to buying property, only 17.0 per cent will invest as an alternative to property and 7.1 per cent will invest as both an additional and an alternative investment.
In terms of the ability to save, 62.1 per cent of respondents say it is harder to save for a deposit than 12 months ago, compared to 67.3 per cent nationally. WA was the state where most borrowers found it harder, at 81.8 per cent.
Mortgage broker usage remains strong and is on the increase, with 41.0 per cent having used a broker to obtain their last property loan (39.6 per cent nationally) and 70.2 per cent saying they would consider using a broker for their next one (70.9 per cent nationally). SA borrowers were the most likely to use a broker, with over half (55.7 per cent) having used one for their last property loan.
“This response supports Mortgage Choice’s national customer satisfaction survey averages from January to October 2006, which show that 91.1 per cent of borrowers who have used Mortgage Choice would recommend our service to others, and 90.1 per cent would use us again. This is a fabulous result for our franchisees, their staff and staff within our Group and State offices,” Mr O’Rourke said.
9-Jan-2007