Mortgagor confidence surges amid rate pause

In making its decision to pause interest rate hikes, the central bank board noted that the “full effect” of the rate hikes was yet to be felt and therefore wanted to assess the flow-on impact of its rate hiking cycle before moving again.

The Westpac Melbourne Institute Consumer Sentiment Index survey was conducted over four days from 3–6 April, which included the RBA’s meeting on 4 April, and found that the overall consumer sentiment index lifted by 9.4 per cent in April to 85.8.

The April pause was welcomed by many mortgage holders, and the index shows that confidence amongst mortgagors lifted particularly sharply this month, rising by 12.2 per cent.

Despite the uptick, however, confidence among mortgage holders remains 14.5 per cent below the level recorded before the tightening cycle began.

In addition, while the ‘time to buy a dwelling’ indicator increased by 8.2 per cent to a score of 71.1, it remained 46 per cent below its peak back in November 2020.

Westpac economist Bill Evans said that despite the uplift, confidence in housing – which is heavily influenced by affordability – remained weak.

“The April result only restores the Index to the 70–80 range where it has held since the tightening cycle began,” Mr Evans said.

House price confidence lifts

On the back of national home values lifting by 0.6 per cent in March 2023 according to CoreLogic’s latest Home Value Index, confidence in house prices has also boomed.

The national index of ‘house price expectations’ lifted by 16.7 per cent to 130.31, only 2.8 per cent below its level in April last year, just before the tightening cycle began.

Across the states, confidence in the outlook for prices in April lifted much more sharply in Queensland and Western Australia up 30 per cent and 36 per cent, respectively, while NSW (up 16 per cent) and Victoria (up 9.5 per cent) also showed signs of confidence increasing.

Commonwealth Bank economist Stephen Wu said while the bounce in consumer sentiment was expected, given the survey was taken around the first on‑hold RBA decision in this hiking cycle, he doesn’t expect the confidence to hold for too long.

“The April pause has clearly led to improving consumer sentiment. However, consumer sentiment remains at very low levels," Mr Wu said.

“We don’t think there will be a sustained lift in sentiment in the months ahead, particularly given the large fixed rate mortgage roll‑off this year.” 

With underlying inflation likely to hold around 6.5–7 per cent, the majors have mixed opinions on whether there will be another hold in May, with expectations that more hikes may be on the horizon.

Current financial conditions ‘unchanged’: Roy Morgan

ANZ-Roy Morgan Australian consumer confidence data echoed Westpac’s survey reporting consumer confidence increased by 1.1 points in the week following the RBA’s announcement to hold the cash rate.

ANZ’s senior economist Catherine Birch said this was the “most positive result” following an RBA meeting since before rate hikes began in May last year, with the gain led by those paying off their mortgage (+3.9pts).

In addition, the score’s ‘future financial conditions’ gained 2.0 points after a 3.1 pt rise the week before, however, current financial conditions’ were unchanged with the subindex below 70 for the fifth consecutive week.

[Related: Majors tweak terminal rate forecasts]