The index is based on historic and recent consumer attitudinal data collected by Genworth and shows homebuyer confidence across Australia has dipped by 1.5% since September 2010 – the second consecutive fall since the launch of the index last year.

“This fall, despite Australia’s relatively strong economic performance was driven by decreased confidence in the natural disaster affected regions of Queensland and Western Australia (WA) coupled with growing concern amongst Australian homebuyers about the rising cost of living,” said Genworth CEO Ellie Comerford.

Natural disasters hit Western Australia and Queensland sentiment

Disaster-impacted borrower sentiment in Queensland and WA was the primary driver behind the index fall, without which the index would have risen by 0.8%.

Queensland was by far the worst affected, with one in three Queensland respondents impacted by the natural disasters in some way, compared to a national average of 14%.

Genworth Hardship data reflects this trend. Total Hardship requests in early 2011 increased by over 70% compared to the same period last year and nearly half (40%) of these requests were natural disaster related.

Most of those affected by the recent natural disasters were fairly optimistic about the recovery with 60% expecting to recover in two months or less. However, one in five believes they will be affected for more than six months.

Awareness of Government relief programs was strong with most homebuyers (78%) aware of relief initiatives. Borrower awareness of lender hardship relief measures was lower at 39%, but over 60% of borrowers using lenders hardship initiatives were more than satisfied with the service and support they received.

“Genworth has worked with lenders to deliver hardship assistance in the wake of natural disasters, and is pleased to find the majority of people that used these solutions were satisfied with the outcomes.

However, flood affected borrowers are telling us they expect to struggle for longer and we are working with lenders to introduce more relief to affected borrowers in the longer term,” Ms Comerford said.

Mortgage stress increasing – Rising costs of living the biggest worry

Overall, the report findings show that debt levels did not change between September 2010 and March 2011 with 27% of Australians putting half or more of their monthly income to paying off debt. However, more borrowers across Australia experienced mortgage stress at 21%, up from 15% in 2010.

The causes of mortgage stress have shifted over the last six months, with borrowers now seeing the rising cost of living as the biggest hurdle to meeting repayments rather than interest rate hikes at 66% compared to 51% respectively.

“Expectations for a relatively stable interest rate environment contrast with soaring food and petrol prices, moving the rising cost of living to the front of borrowers’ minds,” said Ms Comerford.

First homebuyers more anxious about repayment ability

Despite some concerns that first homebuyers had over-committed to high debt levels while generous first homeowner incentives were available, this segment is faring well with above average levels of confidence. However, this result masks the fact one in three first homebuyers spend more than half their monthly income on servicing debt, compared to only 27% of average homebuyers.

Also a concern is first homebuyer outlook for the year ahead, with 24% expecting to find it difficult to meet repayments over the next 12 months compared to the national average of 19%.

“Although first homebuyers are confident, they are most concerned about interest rate rises in the coming year. This reflects the trend of rising property prices forcing them to take on bigger loans to realise their dreams of home ownership,” Ms Comerford noted.

Outlook

Despite an overall drop in borrower confidence and increased mortgage stress, more homebuyers are upbeat about the property market this year, with 38% of those surveyed viewing 2011 as a good time to buy a home (up from 25% in 2010).

However, homebuyers are pessimistic about their ability to repay their mortgages, with the rising cost of living and threat of future rate rises weighing heavily on their minds.

“Genworth will continue to provide the market with valuable insights into the attitudes and sentiment of homebuyers and would-be borrowers. We anticipate the effects of the recent natural disasters will continue to put downward pressure on borrower confidence over the coming six months,” Ms Comerford said.

Click here to download a full copy of the report.

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The Bank has also launched a new Basic Package made up of the Basic Variable Rate Loan with
100 per cent Mortgage Interest Offset Account and a Basic Fixed Rate Loan.

The Basic 3 year Fixed rate is 6.99 per cent per annum – 15 basis points below the standard 3
year Fixed rate.

AMP Banking Head of Sales and Marketing Steve Craig said a growing number of customers want
to combine variable and fixed interest rate loans to provide peace of mind against rising interest
rates.

“This new Basic Package gives our customers a simpler, more competitive, value for money
product with the choice and flexibility they want.

“Our Basic product range has a high degree of functionality for the price, offering borrowers real
value and making AMP Bank a competitive alternative to the major banks,” Mr Craig said.

The changes are effective immediately for new customers.

AMP Banking customers can visit www.amp.com.au or phone 13 30 30 for further information.

The post AMP Bank drops Basic Variable Rate appeared first on AdviserVoice.