25/09/2011
Consumer confidence is the biggest driver to a strong economy, and at the moment it is being tested on an ongoing basis. Genworth has just released its latest “Genworth Homebuyer Consumer Index Report” and it has many interesting statistics including:
•36% of Australians still believe it’s a good time to buy a home;
•56% of potential first home buyers are cutting back on groceries and necessities to save for a deposit;
•The rising cost of living is the main concern (72%) of homeowners struggling with their mortgage;
•85% of borrowers experiencing mortgage stress say that despite struggling they are not behind on repayments;
•Borrowers are becoming more conservative, helping to ensure any rise in mortgage stress is contained – during the last year 41% made an overpayment on their mortgage;
•Recent first home buyers are more optimistic than the average about the future, with 58% saying they will easily meet repayments in the year ahead with only 15% expecting to have difficulties paying their mortgage.
So what does this mean when I try to make sense of it all?
Firstly, many consumers seem to be in control at the moment through cutting back on discretionary spending (much to the chagrin of the retail sector), saving money like they haven’t done so for a long time (RBA reports aggregate household saving is now back at mid 80’s levels), delaying property purchases and borrowing less on credit cards and personal loans. Whilst some of these occurrences are circular, all point to a generally more conservative mindset.
However, all these conservative strategies are underpinned by having secure employment. Without a wage coming in savings will be quickly eroded, credit cards drawn to their limits and financial stress significantly increased.
Apart from employment factors, the other areas of concern people have today seem to stem from uncertainty around what may be going to happen next – the “uncontrollables”. There is no doubt an awareness of the rocky global economic climate and the flow on effects to us here in Australia.
The local issues centre around whether the government’s relationship with the independents could collapse resulting in another federal election, will there be a leadership challenge, what will be the real impact of a carbon tax (if it is introduced) and future interest rate movements? These are times when a strong, stable government, of either persuasion, needs to be running the country, not lurching from one issue to another without clear outcomes being evidenced.
So, as in any times of uncertainty and concern, the first thing people look for is some guidance from a trusted source. It was probably not a surprise to anyone associated with the mortgage broker space that a recent report by Core Data has found mortgage brokers ranked highest with consumers on a number of key measures such as: “understanding customers needs” where brokers scored 87.5% against banks 78.5%; “comprehensive knowledge of loan products” – brokers 87.6% / banks 85.3%; and “NCCP compliance” – brokers 61.4% / banks 57.4%.
Obviously more and more consumers are becoming aware of the benefits of using a mortgage broker with Core Data also reporting broker share now sitting at 41% of all Australian mortgages. Growth in consumers using brokers has been evident in our business. In three of the past four months nMB as a group has recorded our best month, when compared to the same month in previous years. A great result given the overall lending market is down, and achieved through many of our brokers experiencing their own Personal Best months.
