FYI | Dec 01 2010
By Chris Shaw
Mortgage Choice has completed its 2010 Consumer Sentiment Survey, surveying more than 1,000 Australian consumers, including more than 500 with mortgages, about a number of matters related to finance and property matters.
The group's 2009 survey showed interest rates were the major concern for the year ahead but this year's survey shows interest rates now come in second at 16%, with other costs of living such as utility bills moving to the top of the list of concerns for next year at 27%. This is up from 17% last year.
Economic management at Federal Government level is the third biggest concern at 15%, followed by job security at 8%, down from 16% last year, and food costs at 7%.
Mortgage Choice's survey showed 35% of respondents intend to purchase property in the next two years, with 36% of these intending to buy an investment property, 33% their next home and 31% their first home.
The survey showed 27% of potential investors are most concerned about interest rates, while 19% of next home buyers list the level of interest rates as the major concern. Only 8% of first home buyers have interest rates as their primary concern.
Kristy Sheppard, senior corporate affairs manager at Mortgage Choice, notes the survey was conducted prior to the Reserve Bank of Australia (RBA) rate hike in November, highlighting how much of a surprise was the RBA move.
There are potential implications of the rate hike, Sheppard noting 9% of mortgage holders surveyed had indicated based on an interest rate of 7% they could not afford any more rate hikes before considering selling up their property holdings.
The survey also showed 4% of those with mortgages indicated, based on a 7% interest rate, they could afford only one 0.25% rate rise before considering selling their property. Increases of 0.25% to 0.5% could be afforded by 5% of respondents, while 6% could afford 0.5-0.75% of increases and 8% could afford increases in rates of up to 1.0%. On a more positive note, 20% of respondents indicated they could afford rate rises of more than 5.0%.
Among those surveyed, 11% expect rates to rise by up to 0.25% in 2011, while 33% said increases would be between 0.25% to 0.50%. Increases in rates of 0.50-0.75% are expected by 21% of those surveyed, 15% see increases of 0.75%-1.0% and 19% anticipate rates increasing by better than 1.0% next year.
With respect to investing, the survey showed 59% of respondents saw the Global Financial Crisis as making investing in property seem safer than buying shares. About 16% of respondents intend to buy shares rather than property, while 20% intend to buy both.
About 30% of respondents will look at renovating an existing property rather than buying a different property, while the survey indicated 60% of those buying property in the next two years, which makes up 35% of respondents, would be making some kind of sacrifice to do so. These sacrifices include cutting back on spending, forgoing overseas travel, purchasing a less expensive property and taking on an additional job.
The main motivations for buying a property according to the survey were to secure a better financial future, a desire or need to relocate, to add to an existing portfolio or to establish a position in the property market.
In terms of affordability the Mortgage Choice survey showed 31% of respondents viewed the issue as under-rated, while 13% saw it as over-rated. Almost half of those responding expect residential property prices will increase over the next 12 months, while only 13% expect prices will decline in the year ahead.
Looking at personal finance the survey showed of those with mortgages, 55% intend to change their financial situation in the coming year. This is most likely to come via a review of the household budget or of an existing mortgage. Potential measures include a cut back on spending and a refinancing of an existing mortgage.
While 75% of those responding were either very or fairly confident the Australian economy would be strong in 2011, 36% indicated rising interest rates and or the economic recovery would influence them to save more in the coming year.
With respect to mortgage broking, the survey showed the major reason for using a mortgage broker according to 34% of respondents was to save on having to research the market themselves. A majority of respondents, 61%, would consider using a mortgage broker in the future and 64% know what services mortgage brokers provide.
Currently around 40% of all new Australian home loans are sourced by mortgage brokers, with scope for this to increase in the future given 59% of respondents suggested national regulation of the industry would make them more likely to use a mortgage broker.
