Victorian mortgage confidence plummets: ING

Victorian’s mortgage comfort level has plummeted in the last three months, according to the latest ING Direct Financial Wellbeing Index. 

Over the last three months of 2011, the state’s borrowers have gone from being the most comfortable with their level of mortgage debt to being the least comfortable.

Victorian borrowers were the most confident in the September 2011 survey, leading the nation in comfort with their mortgage (5.6 out of a possible 7), household income (4.19) and personal savings (3.58). 

However, in the December 2011 survey, Victorian borrowers scored 5.3 out of seven – the lowest comfort level of all states despite having a relatively small median mortgage debt of just under $187,000. 

The index measures personal comfort level on a scale from 1 (“very uncomfortable”) to 7 (“very comfortable”).

Source: ING

“Victorians are falling behind financially,” says ING. “The fourth quarter of 2011 saw a significant plunge in Victoria’s household financial wellbeing as the state’s index score dropped to 101.4 down from 110.1 in the third quarter. 

“The state also recorded the nation’s lowest comfort ratings across five key indicators including comfort with long term debt, savings, ability to pay bills, income and investments. 

“In 2011 only 27% of Victorians gained ground with their personal finances – 36% fell behind (59% of low-income earners) with 77% blaming the increasing cost of household essentials

“One in four (25%) expect their personal finances to deteriorate further in 2012. 

“Higher taxes/levies and rising living costs are the chief financial concerns for 32% of Victorians, followed by fears of job losses (20%),” the report highlights. 

Further suggesting a gloomier outlook, a higher proportion of Victorians (40%) expect the economy to worsen in 2012 compared to a national average of 35%. 

Conversely Victorians feel more comfortable about their level of savings (up to 3.83 from 3.58), suggesting as shift towards deleveraging. 

About 41% of Victorians are making extra mortgage repayments compared with 36% of borrowers in NSW and the ACT. 

In contrast, mortgage holders in NSW and in the ACT are most comfortable about managing their mortgage repayments and other long-term debts, with the state achieved the nation’s top score for financial wellbeing of 109.1. 

NSW and ACT borrowers scored 5.9 out of 7 on the mortgage debt component of the index. Borrowers from NSW and the ACT have a median mortgage debt of $264,000. 

Only 21% of NSW households saw their financial situation deteriorate in 2011, compared with 32% nationally. 

One in three (31%) NSW households expect the economy to deteriorate in 2012, but 78% see their personal finances improving or holding steady this year. 

Including all six measures of financial wellbeing (mortgages, credit cards, savings, investments, household income and ability to pay bills), the state’s wellbeing index has improved from 108 to 109.1, and NSW and Western Australia have the joint highest overall comfort level of 4.4. 

According to ING, Western Australian borrowers are making the most effort to deleverage, with more than half (55%) making extra mortgage repayments.  The state has the smallest average mortgage debt of $159,000. 

Overall, the survey found that almost two-thirds of households (61%) are comfortable with their home loans with 41% ahead with their mortgages – though is down slightly from 46% in the third quarter. 

Although 35% of Australians expect the economy to deteriorate in 2012, only 22% of households believe their personal financial wellbeing will decline. 

The majority (75%) expect their financial position to improve or remain unchanged. 

One in four (27%) households hold less than $50,000 worth of assets, including equity in the family home (excludes superannuation savings). Over half (52%) have no investments at all outside their home and almost the same proportion (50%) have less than $17,000 in personal savings.


Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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