This article is from the Australian Property Journal archive
AUSTRALIAN homebuyer confidence has slipped 2% from the March quarter and many borrowers are making sacrifices to make overpayment on their mortgages, according to the biannual Genworth Homebuyer Confidence Index.
The index also found the number of homeowners facing mortgage stress has jumped to 25% from 21% in June.
The Genworth HCI shows homebuyer confidence across the nation fell 2% from March 2011, although sentiment was buoyed by a return to confidence in Queensland. Despite the drop, the index is still 3% higher than levels recorded in 2008 during the global financial crisis.
Queensland recorded a 4.2% rebound in overall homebuyer confidence since March, on the back of recovery from natural disasters and improving property prices.
Other states fared less well, with Western Australia now the least confident, whilst Victoria recorded the largest confidence drop (7.1%) during the period.
Genworth CEO Ellie Comerford said the results show the drop in borrower confidence is mainly due to an increase in the number of borrowers experiencing mortgage stress – up from 21% in March this year to 25% in this survey.
However Comerford pointed out that the vast majority (85%) of borrowers who are experiencing mortgage stress said they are not actually behind on repayments.
Instead, borrowers are also becoming more conservative, with over 41% having overpaid their mortgage within the past 12 months.
As to the reasons for mortgage stress, the survey showed the rising cost of living is the number one concern for an increasing proportion (72%) of home owners struggling with their mortgage.
The second and third factors which worry home owners are rising interest rates and existing debt obligations, which are affecting 50% and 33% of stressed mortgage holders respectively.
“Consistent with the March HCI and more recent Genworth International Mortgage Trends Report, cost of living pressures are weighing heavily on borrower’s minds,” Comerford said.
In contrast to these subdued results, the index showed the first homebuyer segment performing strongly and is optimistic about the near future.
“Despite 40% of recent FHBs putting more than half their monthly income towards servicing debt, we found just 15% expect to have difficulties paying their mortgage in the year ahead, and in fact 58% project they will easily meet repayments,” she said.
Meanwhile the index found existing debt remains a hurdle for some potential homebuyers – almost two thirds of would-be home owners have some form of outstanding debt, mainly from paying for education and wedding expenses, along with general living costs.
The survey showed young Australians are resorting to spending cuts including two thirds (68%) cutting back on luxury goods, 60% reducing their clothes budget, and 56% spending less on groceries and other necessities.
“Despite some difficult market conditions, 36% of borrowers surveyed still think now is a good time to buy a home, and aspiring FHBs continue to make the necessary sacrifices to get a foot on the property ladder. If analyst predictions of future interest rate cuts are correct, this may also help support borrower sentiment in the near future,” she concluded.
Australian Property Journal
