New research released by CUA has revealed the majority of residents in Queensland are polarised about the likely direction of the Reserve Bank of Australia's interest rate decisions in 2013.
The annual CUA National Mortgage Survey: Expectations and Intentions provides insights into Australians' expectations and intentions regarding official interest rates, switching mortgage lenders and fixing mortgage rates.
This year's survey contains findings about Queensland residents' planned spending habits in the event of an RBA rate cut at today's meeting. The survey also reveals the factors that would drive the majority of Queensland mortgage holders with a Big Four bank to switch or consider switching to another lender, and who or what are the key factors that currently most influence people's decisions to switch from a variable rate mortgage to a fixed rate.
Interest rate expectations for 2013
• Half of Queenslanders (50%) believe official interest rates will stay on hold at the RBA's Board Meeting in February;
• 35% think official interest rates will decrease in February, while only 15% forecast an increase; and
• Over the course of 2013, Queensland residents are equally divided on the outlook for rates, with 34% believing they will increase, and 37% saying they will decrease.
Spending intentions in the event of a February rate cut
• If interest rates are cut in February, 78% of Queensland variable rate mortgage holders are most likely to use the interest rate cut savings to make extra repayments towards their home loan;
• Just 28% are likely to consider spending on discretionary goods; and
• An even lower 19% are likely to consider investing in shares or investment funds.
• 90% of Queensland mortgage holders with a Big Four bank would switch or consider switching lenders for an interest rate 0.5% below their current lender;
• 72% of Queensland mortgage holders with a Big Four bank would switch or consider switching for lower account fees and charges; and
• 79% of all Queensland mortgage holders would switch or consider switching if their current lender failed to adjust rates following an RBA rate cut.
Mortgage fixing intentions
• Queenslanders remain opposed to fixing their rate, with only 10% of Queensland variable rate mortgage holders planning to fix their rate in the next three months, while 66% would not fix their rate at all.
Interest rates: Queenslanders forecast rates to remain at the same level in February 2013, but uncertain on outlook for year ahead
There is a strong expectation in Queensland that interest rates will stay on hold at the RBA's first Board Meeting of 2013, on 5 February, with the majority of Queenslanders (50%) predicting interest rates will stay the same, compared with 35% forecasting rates to decrease and only 15% to increase. However, for the rest of the calendar year the state is polarised on the outlook for rates.
CUA Caloundra branch manager Debra Liriges said: "The research reveals that while the majority of Queenslanders believe rates will stay on hold following the RBA's first meeting this year, opinions are split on the outlook for interest rates in 2013 and are equally divided between those thinking rates will increase to those that think they will decrease.
"Across the state, 34% of respondents nationally expect rates will increase, while 37% think they will decrease."
The CUA Mortgage Survey has revealed that if the RBA does cut interest rates further, the economic stimulus that may result is not necessarily a clear outcome. The overwhelming majority of Queenslanders would prefer to use any rate cuts to make extra payment on their home loan.
"Despite the RBA's efforts to stimulate the economy with rate cuts, it appears that if the RBA cuts the rate in February, Queenslanders will look to make smart financial decisions. The majority (78%) of variable rate holders in Queenslander are likely to use the savings to make extra repayments towards their home loan, while 28% are likely to spend it on discretionary goods and only 19% are likely to invest the money," Ms Liriges said.
Switching: Queenslanders would switch for a more competitive alternative
An overwhelming majority of mortgage holders with a Big Four bank in Queensland are unhappy with their current lender and would switch or consider switching lenders, with 90% saying they would switch or consider switching if they found an alternative with an interest rate 0.5% below their current lender.
"If the RBA cut rates in February, Queenslanders are sending a clear message to their lender. More than three quarters (79%) of all mortgage holders would switch or consider switching if their current lender failed to adjust interest rates following an RBA rate cut," Ms Liriges said.
Fixing: Majority of Queenslanders still have no intentions to fix their mortgage rates
The CUA Mortgage Survey once again reveals people in Queensland remain significantly opposed to fixing their mortgage rate, with the majority of variable rate mortgage holders (66%) saying they have no intention to fix their mortgage rate, compared with only 10% that would fix.
"In uncertain economic times, you would anticipate that Queensland residents would want to have some clarity to manage their mortgage repayments. While industry commentators have said interest rates are at or near the bottom of the cycle, surprisingly the overwhelming majority of residents in Queensland still prefer a variable rate mortgage to a fixed rate," Ms Liriges said.
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