Home buyer confidence among borrowers at highest level for six years: Genworth

Home buyer confidence has rebounded significantly and is now at its highest level since lenders mortgage insurance (LMI) provider Genworth began surveying mortgage holders in 2007.

The latest Homebuyer Confidence Index, based on a survey of 2,124 mortgage holders, jumped from an index reading of 93.4 in March 2013 to 100.1 at the end of July 2013.

What this means is that confidence about the housing market has rebounded to what it was before the 2008 global financial crisis.

"The spike in consumer confidence recorded since March was driven by a 37% decrease in the proportion of surveyed borrowers who expected to experience mortgage stress over the next 12 months,” said Genworth’s chief commercial Officer, Bridget Sakr.

“It appears that consumers are becoming more confident about making repayments, with the index showing that 29% of homeowners expected interest rates to decrease over the next 12 months – compared to 12% who held this expectation in March."

The index is compiled based on mortgage holders responses to questions about  the proportion of monthly income used to service debts, the maximum loan-to-valuation ratio they are comfortable borrowing at, their repayment history over the last 12 months, their repayment expectations for the next twelve months, and whether they believe that now is a good time to buy a home.

It found that 32% of mortgage holders are comfortable with borrowing more than 80% of the value of the property they are purchasing – the point at which lenders mortgage insurance is usually payable – compared with 28% in the March quarter.

Only 17% of respondents expect to experience mortgage stress over the next 12 months compared with 27% in the last quarter, while the proportion who said they were currently experiencing mortgage stress fell from 23% to 17%.

Mortgage stress fears are greatest in WA (21%) and South Australia (19%) and lowest in NSW (15%) which also experienced the largest fall of the quarter with a reading of 29% three months ago.

“The latest Genworth Homebuyer Confidence Index suggests that homeowners realise that current market conditions – particularly historically low interest rates – make buying property and servicing a mortgage a more attractive proposition than it’s been for a number of years,” says Sakr.

“However, affordability remains a challenge for those yet to enter the market, with 70% of non-property owners believing the dream of homeownership to be unrealistic.”

There was no change in the proportion of respondents who believe now is a good time to buy at 47%, but improvements in NSW (up from 43% to 46%), Queensland (53% to 54%) and South Australia (40% to 46%).

Only 43% of WA mortgage holders believe now is a good time buy – down from 49% from March, a sign of the impact of the mining investment reaching its peak.

Australian suburb picture courtesy of Orin Zebest.