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Mortgage Choice National Consumer Sentiment Survey reveals economic confidence

Australian Franchise News – 05-12-11


Rising living costs are impacting Australians’ ability to save, but the majority plan to make proactive, positive changes to their financial strategy in 2012, according to the eighth annual national Consumer Sentiment Survey.

The independent online survey uncovered the post November cash rate concerns, financial plans, home loan needs and more of 1,086 Australian consumers.

Acting Head of Corporate Affairs, Belinda Williamson said, “Our annual Consumer Sentiment Survey found rising living costs topped the list of Australians’ concerns for the year ahead, which mirrored last year’s results. These costs are likely to have a significant impact on Australians’ ability to save.”

The biggest concern for next year is ‘Other costs of living – utility bills, clothing etc.’ (28% of respondents vs. 27% in 2010), followed by ‘Economic management at a Federal Government level’ (16% vs. 15%), ‘job security’ (11% vs. 8%), ‘petrol prices’ (9% vs. 4%) and ‘food costs’ (7%, equal to last year).

“Clearly, utility bills and other living costs are biting into Australians’ budgets, with more than half – 55% – of the respondents admitting to dipping into their savings to help make ends meet, and 7% saving more to combat the price hikes. Those remaining were unaware of rising costs, have not experienced any or are comfortable with the increases,” said Ms Williamson.

“Almost half of those surveyed were unsatisfied with their level of personal savings. However, it is pleasing to see 56% of respondents plan to make major changes to their financial situation in the coming year, such as revisiting budgets, reducing spending and reviewing mortgages.”

Confidence in the economy
When asked about their confidence in the Australian economy for 2012, 56% were ‘fairly confident’ or ‘very confident’ (vs. 75% in 2010), 20% were ‘a little worried’ (vs. 11%), 19% were ‘not worried’ (vs. 13%), and 5% were ‘very worried’ (vs. 2%).

“Year on year confidence in the Australian economy has dipped, however, it is good to see the majority of Australians still see a positive economic outlook for 2012. In fact, of those who plan to make changes to their financial situation next year, 20% of non-mortgage plan to take out a mortgage and 9% of mortgage holders plan to take out an extra one. Gen Y was the most positive about the economy and buying property,” said Ms Williamson.

“This should bode well for the real estate, construction and housing finance industries,” she added.

Making financial changes in the coming year
When asked how they felt about their level of personal savings, 49% of respondents were ‘unsatisfied’, 30% were ‘satisfied’ (5% ‘very’, 25% ‘mostly’) and 21% were ‘neutral’.

46% of the 538 mortgage holders surveyed plan to make changes to their financial situation in the coming year, compared to 55% in 2010. The top five changes were: ‘review my budget’ (52% vs. 69% in 2010), ‘cut back on spending’ (47% vs. 53%), ‘review my mortgage/s’ (45% vs. 61%), ‘refinance my mortgage/s’ (36% vs. 31%) and ‘pay off my credit card/s’ (36% vs. 43%).

Almost two thirds (65%) of the 548 non-mortgage holders surveyed also plan to make changes to their financial situation in the coming year (vs. 48% in 2010). The top five changes were: ‘review my budget’ (59%, equal to 2010), ‘cut back on spending’ (52% vs. 51%), ‘pay off my credit card/s’ (45% vs. 50%), ‘increase my debt repayments’ (27% vs. 21%) and ‘take out a mortgage’ (20% vs. 18%).

“It is pleasing to see Australians reviewing their financial situation and taking a proactive approach to reducing debts and limiting spending. These strategies should help more Australian mortgage holders and families cope with increased living costs in the coming year,” Ms Williamson said.

Property ‘safer than shares’
Ongoing financial turmoil has made property seem safer than shares for 63% (vs. 59% in 2010) of survey respondents. This figure has risen for three consecutive years in the Mortgage Choice Consumer Sentiment Survey series. Gen Xers were most likely to believe in property investment over shares.

The top three motivations for purchasing property were:
1) To set themselves up financially for the future (57% vs. 50% in 2010)
2) To get their foot in the property door (31% vs. 22%)
3) They see more benefit in investments such as property than in the share market (27% vs. 31%)

“With ongoing financial volatility here and overseas, Australians are increasingly viewing property as a safer haven than shares. It is good to see a greater number of respondents are motivated by the long term benefits of entering the property market earlier in life,” said Ms Williamson.

Interest rates and their influence on buying decisions
The current interest rate climate is encouraging a significant number of people to buy property, with 26% saying they will be ‘more likely’ to buy if rates drop further in the next six months. 3% will be ‘less likely’ to buy, 29% will not be ‘more or less likely’ to buy and 42% are ‘not looking’ to buy.

If interest rates are stable over the next six months, 17% will be ‘more likely’ to buy property, 3% will be ‘less likely’, 38% will not be ‘more or less likely’ to buy and 42% are ‘not looking’ to buy.

“It is interesting to note interest rates, the second biggest concern in 2010’s survey, slipped to seventh place in this year’s list of top concerns for the year ahead – the lowest point ever reached in our Consumer Sentiment Survey series,” Ms Williamson said.

Nearly half (47%) believe the Federal Government is doing ‘not enough’ to encourage affordable housing, 26% said it is ‘doing nothing’, 16% were ‘undecided’, 9% believe it is ‘doing enough’ and 1% feel the Government is doing ‘everything’ to encourage affordability.

Other key national statistics

• Rental squeeze: 86% feel the rental squeeze is having an effect on property prices in their state.

• Property prices: 30% believe Australian property prices will increase over the next 12 months, 28% believe they will decrease, 26% believe prices will remain stable and 16% don’t know. Gen Ys were the most adamant about property price rises, followed by Gen Xers and Baby Boomers.

• The property purchase process: When asked how well informed respondents were about the property purchase process, 17% were ‘well informed’, 34% ‘know the essentials’, 35% have ‘some idea’ and 14% have ‘no idea’.

• The switch to fixed: 79% of mortgage holders will consider switching to a fixed term loan only when lenders’ fixed rates fall below 5.75%.

• Mortgage buffer: 67% of mortgage holders have only two months’ wages or less as a buffer in their mortgage.

• Using a mortgage broker: 64% of all respondents will consider using a mortgage broker in the future and the top reasons were: 1) Professional mortgage brokers are experts in mortgage products, whereas I am not 2) Mortgage brokers save me from researching a range of lenders and loans myself and 3) It saves me time by looking after the paperwork and running around.


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