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 in November by the financial services franchise with 1,021 Australians, many of which were property owners, 68.8 per cent of respondents believed the Australian economy will be strong in 2007. This was only slightly down on the 70.8 per cent from last year’s survey and the 81.5 per cent response from 2004.
It is interesting to see that the gender break up showed females were less confident than males, with 64.8 per cent of females confident of the economy during 2007 comparing with 72.6 per cent of males. The most confident state was Queensland, at 76.6 per cent, and the least confident was New South Wales at 61.9 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. 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 over one third of respondents - 35.1 per cent - 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 consumers’ minds, with 47.4 per cent citing rate increases (49.5 per cent of females and 45.3 per cent of males) and 17.2 per cent citing petrol prices as the biggest concerns for their financial future. Job security came in third and a fall in housing prices garnered the smallest amount of concern. 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 respondents believe a rate rise is imminent, with 86.3 per cent saying interest rates will rise in the first quarter of 2007. Females were more likely to see this happening, at 88.7 per cent compared to 84.0 per cent of males. Last year, 69.7 per cent believed this to be the case for the first quarter of 2006.
“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 16.5 per cent of respondents stating that they would not be able to afford any increase. Last year’s survey, obviously completed before the 2006 rises, saw 19.3 per cent saying they could not afford any increase.
“So, however impossible they thought it might be, Australians have managed to find more in their mortgage budget for interest rate rises”.
In response to this question - ‘what is the highest rate rise you could afford to meet repayments on’ – 21.0 per cent could afford a 0.25 per cent increase, 21.8 per cent could afford a 0.5 per cent increase, 7.0 per cent could afford a 0.75 per cent increase and a significant 33.7 per cent could afford a 1.0 per cent increase.
Females were less able to afford a large increase – 27.5 per cent of females and 14.9 per cent of males could afford only a 0.25 per cent increase while 27.5 per cent of females and 39.5 per cent of males could afford a 1.0 per cent increase. State-wise, NSW had the most borrowers who could not afford an increase (19.2 per cent) and WA had the fewest (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 Australian borrowers can afford to continue paying their mortgage without needing to reassess their budget or loan.
The majority of respondents believe housing prices will remain stable (34 per cent, down from 41.8 per cent last year), 33.5 per cent thought they would increase in value (only 17.8 per cent last year) and 23.1 per cent predicted a decrease (32.8 per cent last year). 9.3 per cent were unsure.
It is not surprising that WA had the most respondents say housing prices would increase (44.5 per cent) while NSW had the fewest optimistic (22.9 per cent).
Comparing respondents planning to invest in property in the next 12 months to last year, a similar amount will buy property (35.1 per cent compared to 31.5 per cent in 2005) - with that percentage broken down into 17.5 per cent buying an investment property and 17.6 per cent buying to owner occupy. State-wise, WA respondents were the most likely to purchase, at 40.0 per cent, while NSW would see the fewest, at 31.7 per cent.
When asked if they were making sacrifices in order to purchase the answer from 74.9 per cent was ‘yes’. 36.9 per cent will cut back on spending, 8.1 per cent plan to purchase a less expensive property than they desire, 7.3 per cent will remain in their current job and 5.9 per cent have or will move back in with their parents/in-laws to save on rent. It is interesting to note males were more likely to make sacrifices – 27.2 per cent compared to 23.0% of females.
“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.”
Many of the 64.9 per cent of responding property owners not planning to buy in the next 12 months will instead renovate existing property, with 31.3 per cent saying this was the case. Last year, 39.6 per cent planned to renovate rather than buy.
In terms of the ability to save, 67.3% of respondents say it is harder to save for a deposit than 12 months ago. This is a more positive figure than last year’s 75.7%. Many more females found it harder, at 74.7%, compared to males at 60.0%. WA was the state where most borrowers found it harder, at 81.8%.
Mortgage broker usage remains strong and is on the increase, with 39.6% having used a broker to obtain their last property loan (up from 33.3%) and 70.9% saying they would consider using a broker for their next one (up from 65.5%). Females were more likely to have used a broker, at 43.0% comparing with 36.4% of males. SA borrowers were the most likely to use a broker, with over half (55.7%) 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% of borrowers who have used Mortgage Choice would recommend our service to others, and 90.1% 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