How your clients really feel about the economy

by 09 Jul 2013

Australian borrowers maintain a pessimistic outlook on the economy despite the pending election, with nearly half (48%) believing it will worsen before the end of the year – and a meagre 10% expecting it to improve - according to the CUA National Mortgage Survey, Expectations and Intentions.

Furthermore, brokers can expect an even greater increase in the trend towards mortgage fixing.

 “Prevailing issues in the current economic environment are clearly making Australians cautious about making financial decisions,” says Jason Murray, CUA GM, products and marketing. “Even a new or reinvigorated government following the federal election in September doesn’t appear to be buoying their outlook.”

When it comes to interest rates, CUA’s survey shows that Australians’ expectations are at odds with industry commentators. Experts are currently tipping the official cash rate to either fall or stay the same by the end of 2013, but Australians expect them to either increase (37%) or stay the same (36%). Just 27% expect them to decrease – this is 10% lower than in January, when 37% expected rates to decrease by the end of 2013.

“The official cash rate is already at a 30-year low and, despite some experts predicting that it will go lower and also given the current economic landscape, Australians are still uncertain. Our research does however highlight that women are more inclined to think rates will increase towards the end of the year than men – 47% versus 28%,” Murray adds.

Uncertainty around interest rates will likely enhance the current trend towards mortgage fixing, says Murray.

“CUA’s Survey certainly reflects this, showing that almost four in ten (36%) Australians who currently have a variable rate mortgage are planning to fix their mortgage rate in the future. This has increased by 7% from January when three in ten (29%) had this intention. Young Australians under 30 are more likely to seek certainty in their repayments, with more than half (56%) planning to fix their mortgage in the future.”

Finally, the research indicates that a lower interest rate is the most influential factor behind consumers switching financial institutions. Eight in ten (81%) mortgage holders would switch or consider switching if a lender offered a rate 0.5% below their current lender, six in ten (62%) for a saving of 0.25% on their mortgage and eight in ten (78%) if their lender failed to adjust their rate following an RBA rate cut.

“There are some great offers for mortgage customers in the market right now with many lenders offering rates significantly lower than the major banks,” says Murray.


  • by MCC 9/07/2013 3:29:03 PM

    I wont make any comment in regard to rate movement other than to say that current bond market yields will have some impact on borrowers decisions to take on fixed rates at present. However as to the other issue, consumer caution this may have more to do with employment levels, participation rates, & the transition to casualization of the labour workforce over the last 3 decades. The unemployment rate at 5.2% or thereabouts may no longer be a realistic measure? We need to know what the 'underemployment' rate is & how its measured particularly because of the difficulties faced with lower growth across a broad number of industry sectors. If households hve insufficient employment they have insufficient income & that creates stress around job uncertainty. Thats the reality around labour force casualisation.

  • by Broker 10/07/2013 3:26:41 PM

    MCC , never a truer word spoken.