While it now seems unlikely that the RBA will cut rates this year, a majority of home owners have made it clear that any rate reductions would only encourage them to pay more off their mortgage.
A national survey of more than 1,000 homeowners and investors commissioned by Mortgage Choice, found 50 per cent intend to contribute more to their home loan if interest rates fall over the coming months, rather than spend any additional funds.
Seven per cent said they would spend more but also save more by contributing extra to their home loan, while 30 per cent said they would “save more money in some other way” and 6 per cent said they would “spend more but also save”.
But while a rate reduction would ultimately see more homeowners create a bigger financial buffer against mortgage stress, Mortgage Choice spokesperson Kristy Sheppard said yesterday’s cash rate decision was the right one.
“Sanity prevailed with September’s cash rate decision. It should lead to improved consumer and business confidence as spring moves in,” she said.
“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.”