The Reserve Bank has presented the carrot, but few borrowers appear to be biting, according to mortgage enquiry figures from mortgage broker Loan Market.
Loan Market, part of the Ray White Group, has recorded only a 5% increase in loan enquiries to date in May compared with April.
The Loan Market update follows mortgage comparison website Ratecity.com.au noting that the biggest change in borrower behaviour of late has been an increase in refinancing activity, with 18,000 borrowers refinancing their home loans in March – the highest number of refinanced home loans in one month since April 2008.
Loan Market says the underwhelming response from consumers to date means further stimulus is needed.
“The RBA’s 50-basis-points rate reduction was an essential starting point and with most banks passing on a significant amount of the rate cut, mortgage holders have been able to start better combat the rising cost of living,” says Loan Market corporate spokesman Paul Smith.
“But it looks as if more reductions from the RBA will be needed to make a real impact on the economy, especially in housing and retail.”
“With the situation in Europe deteriorating over the past few weeks again, fresh concerns over the domestic impact of a eurozone collapse will keep consumer confidence reserved and subdued.”
“The RBA has room to take the cash rate down significantly, and we expect to see the official rate lowered again at the central bank’s June meeting,” he says.
A recent Loan Market online poll found almost 80% of consumers were using the benefits from the May rate cut to boost their home loan repayments or increase savings.
Only 2% of respondents were planning to spend the extra cash resulting from the interest rate reduction.
“Further rate cuts are essential to revive struggling sectors such as retail and housing which have been floundering in this two-speed economy,” says Smith.
This article first appeared on Property Observer.