Broker News

Homebuyer confidence down in March

National homebuyer confidence posted a modest decrease between September 2013 and March 2014 according to the latest Genworth Homebuyer Confidence Index. Confidence fell by 1.7% to 90.8 in March.

First homebuyer confidence also declined in March, to 82.3 from 85 in September 2013.

“The drop in sentiment between September 2013 and March 2014 appears to be driven by a higher proportion of first homebuyers expecting difficulty meeting their mortgage repayments in the next 12 months, increasing from 32% in September 2013 to 39% in March 2014,” the survey states.

Meeting mortgage repayments continues to be a challenge for homeowners – 28% struggled to meet some monthly repayments during the past 12 months, and 30% expect a similar struggle over the year ahead.

Approximately one quarter of homeowners (25%) use more than half of their income to service debt – which represents a 3% fall from the September figure of 28%. The survey attributes this to a reduction in homeowners’ discretionary repayments and lower interest rates lowering minimum repayments.

Just over half of homeowners (52%) expect to repay their mortgage easily over the next 12 months.

“Cost of living remains the key driver of mortgage stress for homeowners (49% versus 25% for FHBs) while concerns around underemployment is the main driver of mortgage stress for FHBs (63% compared to 32% for homeowners),” the survey says.

One third of first homebuyers use more than 50% of their income to service their debts.

Variable rates were the most popular loan type for first homebuyers (41%), followed by fixed rates (35%) and flexible part fixed/part variable (20%).

Interestingly, first homebuyers were twice as likely to consult another lender to refinance, with 47% indicating a ‘good likelihood of doing so’ compared to 23% of all homeowners.

The survey reveals more than half of investors think now is a good time to buy a home, while 59% of first homebuyers believe it is a good time to buy property. In comparison, the overall proportion of homeowners who think now is a good time to buy fell from 46% in September 2013 to 42% in March 2014.

“Almost half of Australian homeowners (49%) agree low interest rates on mortgages have improved housing affordability over the last two years while a further 40% neither agree or disagree,” the survey states. “This indicates that many might see lower interest rates being offset by rising house prices.”

Across the board there is evidence of a strong demand for investor loans – with lending commitments for this group increasing by 29% between January 2013 and January 2014 accord to the RBA. The survey shows 39% of investors are comfortable borrowing more than 80% of the value of the property.

Despite nearly three quarters of prospective first homebuyers (71%) believing homeownership is realistic, one third are struggling to save a deposit.

Just 29% of this group report to being comfortable with an LVR of above 80%.

“Around two-thirds of all homeowners (65%) believe that today’s prospective FHBs will have a harder time getting into the market than the previous generation did, while just under a quarter (23%) thought that it was probably just as hard.”

Published on: Wednesday, March 26, 2014

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