82% say rising fuel costs hurt more than RBA rate hike

Rising fuel costs have a bigger impact on the hip pocket than movements in official interest rates, say Australian home owners.

As the Reserve Bank meets to consider interest rates, a new survey commissioned by Wizard Home Loans shows that 82 per cent of Australian home owners say rising fuel costs have hurt more than higher mortgage repayments triggered by the March rate rise.

The March rate hike increased average monthly mortgage repayments by $33 a month, or $396 over the year*.

"Mortgage repayments used to be the major concern for Australian home owners," said Wizard Home Loans Chairman, Mark Bouris.

"Now, rising fuel costs hold the title with a massive majority. What’s more, while half of Australian home owners think an interest rate cut is not on the cards, meaning no reduction in their mortgage repayments, they still say higher fuel costs will continue to be the biggest drag on family finances," he said.

Only 12 per cent of those surveyed think there will be a rate reduction before Christmas, and 16 per cent in the first half of 2006. 50 per cent say they don’t think the RBA will cut rates between now and the end of next year.

"While consumers are not expecting the Reserve to cut rates, there is increasing evidence that they may adjust rates downward in the first half of 2006."

"But fuel prices are the big concern for Australian home owners now and with little indication of a turnaround in the near future, it’s not surprising that over 70 per cent of consumers say the price at the pumps means there will be less to go around at Christmas," said Bouris.

30 per cent say they will have much less to spend on Christmas, and another 40 per cent say they will have a little less to spend on the festive season.

"Recent data is already showing a slow down in retail spending and falling consumer confidence. And the Wizard survey shows that people are forgoing luxuries and are going out less," said Bouris.

34 per cent say they’re spending less on luxuries and 40 per cent are staying at home more.

"When costs like filling up the tank increase, and continue to increase, other spending gets chopped and things like dinner out on Friday are put on hold," said Bouris.

"We’ve seen consumers react like this to interest rate rises in the past, but because rising fuel costs are making a bigger dent in family budgets, it follows that it could have a bigger impact on consumer spending."

"But on the brighter side, it looks like larger petrol bills could be good for the waistline with nearly one in five saying they’re walking more," he said.

*Based on a home loan of $200,000 at an increased interest rate of 6.97 per cent over 30 years.

For further information contact Wizard Mt Waverly, 204 Blackburn Road, Mount Waverley on 9887 6922.

Wizard Home Loans is Australia’s leading non-bank lender with over 250 branches across Australia and New Zealand. Three times voted best non-bank of the year by Australian Banking and Finance magazine, Wizard Home Loans is predominantly a residential mortgage lender with

an award-winning range of competitive financial products, including car and personal finance products. In October 2004 Wizard became part of GE Money, the consumer finance arm of General Electric.

The survey was conducted by pureprofile Ltd and commissioned by Wizard Home Loans on 1 September 2005. Over 500 Australian home owners were surveyed.