Consumer sentiment up in WA: Mortgage Choice

Consumer sentiment is up in Western Australia, according to mortgage broker Mortgage Choice, with 75 per cent believing the economy will be strong next year, while 47 per cent were concerned about interest rate rises.

The full text of a company announcement is pasted below

The annual consumer sentiment survey conducted by Mortgage Choice, 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, 75.5% of Western Australian respondents believed the Australian economy will be strong in 2007. Nationally, this was the belief of 68.8%. Queensland was the most confident (at 76.6%) possibly due to its strong housing market while the least confident state was New South Wales (at 61.9%).

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 over one third of WA respondents - 40.0%, compared to 35.1% 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 WA consumers' minds, with 43.6% citing rate increases and 14.5% citing petrol prices as the biggest concerns for their financial future. Job security concerns came in third at 13.6% while a fall in housing prices garnered the least concern at 6.4%. Interestingly, WA was the least concerned while South Australia was the state most concerned with rate increases, at 55.8%.

The vast majority of respondents believe a rate rise is imminent, with 82.7% saying interest rates will rise in the first quarter of 2007. This compared with 86.3% 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 high in WA, with only 9.2% of respondents stating that they would not be able to afford any increase. Nationally, 16.5% felt that they would not be able to afford any increase.".

In response to this question - 'what is the highest rate rise you could afford to meet repayments on' - 16.1% could afford a 0.25% increase, 21.8% could afford a 0.5% increase, 9.2% could afford a 0.75% increase and a highly significant 43.7% could afford a 1.0% increase.

Happily, WA had the fewest borrowers who could not afford a rise with QLD following at 13.5%. NSW had the most financially stretched borrowers, at 19.2% of respondents.

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%, it seems most WA borrowers can afford to continue paying their mortgage without needing to reassess their budget or loan.

The majority of WA respondents believe housing prices will increase (44.5% compared to 33.5% nationally), 28.2% believed they would remain stable (compared to 34% nationally) and only 19.1% predicted a decrease (23.1% nationally) while 8.2% were unsure.

It is not surprising that WA had the most respondents say housing prices would increase, having spent the last few years caught up in a housing boom, while NSW was the least optimistic (only 22.9%).

As mentioned earlier, the number of WA respondents planning to invest in property in the next 12 months was positive at 40.0%, comparing well with the national figure of 35.1%, with that percentage broken down into 20.0% buying an investment property and 20.0% buying to owner occupy. Interestingly, SA had the highest number of those looking to buy to live in, with the nearest state being QLD at 20.1%. WA will see the highest number of overall purchasers.

When asked if they were making sacrifices in order to purchase the answer from 79.5% was 'yes' (74.9% nationally). 34.1% will cut back on spending, 11.4% will remain in their current job, 6.8% will buy a less expensive property than desired and 6.8% 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."

"Although WA has been experiencing a boom recently, borrowers should still consider property investment overall as a long term strategy because of its cyclical nature. What is a boom now can easily be a slowdown within months so it is best to remember that, 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 60.0% not planning to buy in the next 12 months will instead renovate existing property, with 36.7% saying this was the case.

Another popular financial portfolio growth strategy is buying shares, with 47.3% planning to invest in these during 2007 (WA being the state with the highest number planning to invest this way, compared to 37.3% nationally). 27.3% will invest in addition to buying property, only 10.9% will invest as an alternative to property and 9.1% will invest as both an additional and an alternative investment.

In terms of the ability to save, 81.8% of respondents say it is harder to save for a deposit than 12 months ago, compared to 67.3% nationally. WA was the state where most borrowers found it harder, well in front of the next state, SA at 72.7%. Again, this is not surprising given the housing price boom experienced in WA, and especially Perth and the nearby coastal towns over the past few years.

Mortgage broker usage remains strong and is on the increase, with 49.4% having used a broker to obtain their last property loan (39.6% nationally) and 79.1% saying they would consider using a broker for their next one (70.9% nationally). 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.