September 07, 2011
Yesterday's Reserve Bank decision to keep the cash rate steady for a tenth successive month is cause for celebration, though a rate reduction would have resulted in more than half of all Australians with home loans building a bigger financial buffer against mortgage stress.
A national survey of 1,000+ homeowners and investors commissioned by Mortgage Choice and completed this week found 50% intend to contribute more to their home loan if interest rates fall over the coming months, rather than spend any additional funds. 7% will spend more but also save more by contributing extra to their home loan.
As for the remaining respondents:
- 30% will 'save more money in some other way'
- 6% will 'spend more but also save more in some other way'
- 4% will 'spend more and save the same amount'
Only 4% will throw caution to the wind and spend more without saving any money at all.
Mortgage Choice spokesperson Kristy Sheppard said, "Sanity prevailed with September's cash rate decision. It should lead to improved consumer and business confidence as spring moves in.
"A rate rise would have increased the financial strain on businesses within housing, manufacturing, retail and many other industries. Ongoing rate stability will hopefully see them move to steadier ground, to a position where they feel less pressure to cut employee hours or reduce staff numbers.
"Borrowers will be delighted with the decision, but obviously would have been much more relieved to see a rate drop. However, steady rates probably won't result in most heading back to the shops.
"Our new national survey discovered only one in five of the 1,000-plus respondents, all of whom were mortgage holders, will spend more if interest rates drop. In fact, every second person will simply contribute all extra funds into their home loan.
"96% will save more money or the same as they have been if rates fall, which clearly demonstrates the mindset of today's cautious consumer. De-leveraging while building a protective financial shield against tougher times is very much at the forefront of their decision making.
"Our findings also indicate current interest rates aren't contributing to borrower stress as a number of commentators suggest. What they are doing is stopping the majority of mortgage holders from creating a bigger financial buffer via making extra repayments."
For further information or to arrange an interview, please contact:
Mortgage Choice Corporate Affairs
02 8907 0472 / 0407 416 124