Login
ISCOVER
As consumer sentiment improves, writes Alan Shields, brokers should be aware that potential buyers are doing a lot more to research their home loan
AT RFI, as a market research company specialising in financial services, we have to keep our fingers on the pulse of what is most relevant to property market participants. Consumer sentiment, including consumer attitudes towards and use of mortgage brokers, is a key component.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
Consumer sentiment has been on a roller-coaster ride over the past few years and 2011 has been no different. As we emerged from ‘GFC 1’, sentiment began to ameliorate and at the end of 2010 we were starting to kid ourselves that the worst was over.
In the first quarter of 2011, natural disasters struck, and for the first half of the year we saw consumer sentiment plummet, exacerbated by overseas debt crises, weakness in pockets of the domestic economy and uncertainty over cash rate movements.
To put this uncertainty into perspective, RFi’s regular test of mortgagor sentiment in June 2011 showed that more people were worried about repaying their mortgage than at any other time in the past four years.
Since August, we have seen consumer sentiment rebound somewhat, but it still sits some way short of where it was at the same time last year. In addition, at the beginning of November we saw an end to the cash rate debate when the Reserve Bank chose to cut the target by 25 basis points.
Regardless of an improvement in consumer sentiment and the drop in the cash rate, consumers remain uncertain and concerned about their future. In such an environment, consumer behaviour can change considerably.
According to the Australian Bureau of Statistics, the value of lending commitments for refinancing increased by 29 per cent between August 2010 and August 2011. This compares with growth in total owner-occupied lending of just six per cent.
A less obvious change in behaviour has been measured by RFi and concerns prospective property purchasers.
Over the past two years, we have been asking consumers to tell us at what point in the property purchasing process they begin researching a mortgage.
When we began asking the question in 2009, we found that the two most common responses were, “I didn’t do any research; I went directly to my lender” or, “I didn’t do any research; I went directly to my broker”.
However, over the past two years, those responses have diminished in significance and the most common responses now show consumers research their mortgage “before they start looking for a property” or “when they are looking for property”.
The conclusion is simple: consumers have become more accustomed to research, have more access to research, find research easier and therefore they are doing more of it.
But what we also have observed is a spike in June 2011 in the proportion of people telling us they did their research before they started looking or while they were looking for their property. These responses have risen to 26 per cent and 21 per cent respectively.
What this tells us is that in an uncertain market, consumers are more discerning about their decisions and are careful to do some work up-front to make sure they get the right mortgage.
By Alan Shields, Director, RFi
