Australians are feeling cautiously confident in their ability to service debt as falling interest rates take effect and, according to a Genworth Financial mortgage study, the proportion of struggling borrowers has fallen.
The Genworth Financial 2009 Mortgage Trends Report, which surveyed 2,000 consumers during April and May, revealed that while Australians are generally reducing debt levels in response to unemployment fears, the proportion of borrowers struggling to meet their mortgage repayments in the past 12 months has fallen to 17 per cent, down from 23 per cent in 2008.
Genworth CEO Martin Barter said the results are surprising given expectations for rising unemployment, which increases the likelihood of mortgage defaults.
Some 51 per cent of those surveyed cited higher living costs and 26 per cent other debt obligations as the primary reasons for hardship, and yet 43 per cent believe it is a good time to buy property (up from 33 per cent in 2008).
Barter cautioned that while Australians are building economic buffers to weather the downturn, the effects of rising unemployment and underemployment remain unknown. While 21 per cent were revealed to have no debt compared with 18 per cent in 2008, and the number of borrowers overpaying their mortgages increased to 41 per cent (up from 31 per cent in 2008), the report showed that unemployment threatens 24 per cent of all respondents. Some 13 per cent of borrowers surveyed have less than one month’s mortgage repayments in reserve.
The report also revealed that first home buyers are poorly prepared, with 24 per cent rushing to take advantage of the First Home Owners Grant. Barter said their debt burdens have risen substantially, with the average loan size increasing by 6.4 per cent compared with an increase for non-first home buyers of 2.8 per cent. Some 19 per cent of first home buyers surveyed anticipate difficulty with repayments in the future.
