The importance of interest rates to borrowers has declined dramatically since last year, raising questions about the potential effect of yesterday’s 25 basis point cut, a new survey has found.
Almost one in three first time borrowers are “unaware” of their home loan’s interest rate, according to Mortgage Choice’s 2012 First Homeowner Survey. This also saw concern over interest rates drop from 47 per cent in 2011 to 13 per cent this year.
With a number of experts indicating yesterday that this may be a push for tenants to get off the rental treadmill and into the housing market, stimulating activity, what may occur is now uncertain.
“These statistics serve as a timely reminder that borrowers should take stock of their financial situation, especially for what is often their biggest financial commitment, their home loan,” said company spokesperson, Belinda Williamson.
“It is encouraging to note that as a result of other cash rate cuts that have occurred this year, 72 per cent of recent first time borrowers have kept their home loan repayments at the pre- rate cut level or increased them further as a result. This is one way to successfully live loan-free, faster,” said Ms Williamson.
“We hope to see more borrowers reviewing their situation and considering the possibility of increasing the frequency and amount of their repayments. After all, repaying your home loan sooner opens the doors to more investment opportunities.”
Laing+Simmons's general manager, Leanne Pilkington, also said that further action beyond a rate cut will be needed to see changes in the housing industry.
"Recent cuts to the official cash rate have not had the desired impact and while activity has picked up with the commencement of the spring selling period, there is substantial improvement still to be realised for the sector to be deemed healthy again," Ms Pilkington said.
She pointed to a reconsideration of stamp duty as a "place to start" for the government.
"Another area requiring a commitment from Government is an improvement to the planning and development approval process," she said.
However, Mortgage Choice found that the main point of concern for recent home owners was utility bills and job security.
Over 900 recent first home owners were surveyed from across Australia for this survey.
- How do you think the recent rate cut will affect the housing market?