the adviser logo

Australian mortgagor confidence lowest in three years

by Fabian Cotter12 minute read

Consumer confidence and sentiment have taken a sharp slide this week, latest research from major banks has revealed.

All three housing-related cohorts — mortgagors, renters and owners — have reported drops in confidence levels, data from major banks has uncovered.

The trend mirrors latest consumer sentiment findings, which noted a return to ‘historic lows’, where ‘weaker reads’ have only ever been seen during 1991/92 economic recession.

According to the Australia and New Zealand bank (ANZ)’s Roy Morgan Australian Consumer Confidence Rating released Tuesday 14 February, consumer confidence dropped 5.5 points (pts) last week to 78.1 after a 3.2-point fall the week prior.


This is its lowest level since early April 2020, the major bank confirmed.

It also found that confidence declined across all five mainland states for a second week consecutively.

The weekly ANZ-Roy Morgan Australian Consumer Confidence Rating is based on 1,461 interviews conducted “online and over the telephone” during the week to Sunday, ANZ explained.

Other notable results included: ‘weekly inflation expectations’ rose 0.1pt to 5.5 per cent while its four-week moving average remained unchanged at 5.4 per cent.

Four of the five confidence subindices were down, the survey revealed.

The ‘current financial conditions’ category fell 4.9pts to just above its record low in late March 2020, and the ‘future financial conditions’ question dropped 3.7 pts.

Additionally, the ‘current economic conditions’ plunged 9.3pts, which was its third straight weekly decline, ANZ outlined.

Notably, ‘future economic conditions’ featured a 1.2-pt rise while the ‘time to buy a major household item’ category dropped 11 points, the research found.

Mortgagors feeling the pinch

“Consumer confidence fell after the RBA [Reserve Bank of Australia] raised interest rates by 25bp,” said ANZ senior economist Adelaide Timbrell.

“This was the sharpest weekly drop in confidence since the June 2022 RBA meeting, which delivered the first 50bp cash rate hike of the current interest rate cycle.

“The average confidence among people paying off their mortgages fell sharper than other housing cohorts last week, by 10 points to its lowest since early April 2020,” she explained.

“Confidence among homeowners and renters also fell, by 5.2 points and 2.9 points, respectively,” Ms Timbrell added.

“The subindex for whether ‘it is a good time’ to buy a major household item dropped to its lowest since April 2020,” she added.

Mortgage belt under intense pressure

In the latest Westpac Bank-Melbourne Institute Consumer Sentiment Index also released on Tuesday, it recorded a 6.9 per cent fall in February thus far.

It assessed that hopes of a break from cost of living pressures and rate hikes have been dashed.

Additionally, Westpac has confirmed that sentiment is back at historic lows not seen since the last recession.

More than half of consumers “expect mortgage rates to rise by 1pt or more” while they also report “intense pressure on finances,” especially for the mortgage belt.

It added that attitudes towards major household purchases was fourth lowest in 48 years and confidence around jobs was still positive, but “starting to get rattled again”.

As Westpac senior economist Matthew Hassan explained: “After a modest rally through the Christmas-New Year period, consumer confidence has fallen sharply to be back near the historic lows seen last November.”

“Cost of living pressures and interest rate rises continue to weigh heavily.

“Hopes of some easing in both have been dashed by the strong December quarter CPI and the RBA’s resumption of its interest rate tightening cycle,” he said.

At 78.5, the latest index read is “a touch above” the 78 read in November, but below the low point of the GFC (79.0) and only slightly higher than when the COVID-19 pandemic first hit in April 2020 (75.6), Ms Hassan highlighted.

“Prior to that, we need to go back to the deep recession in the early 1990s to find weaker Index readings,” he mused.

Dramatic change after February increase

As Westpac highlighted, the latest sentiment decline follows Australian Bureau of Statistics (ABS) figures released late last month showing consumer price inflation surged from 7.3 per cent in September to 7.8 per cent in December.

This took Australia’s inflation to a 32-year high and “putting it on a par with the very high rates seen in major developed countries abroad.”

 “Interest rates were also a clear factor weighing on confidence in the month. The RBA raised the official cash rate by a further 0.25pts at its February meeting, the announcement coming mid-way through the survey week,” Mr Hassan assessed.

“Sentiment amongst those surveyed before the decision showed a relatively steady 83.5, but sentiment amongst those surveyed after showed a steep fall to 74.8.”

“Given that the move was widely anticipated, the negative response likely reflects the clear signal from the RBA Governor that further increases can be expected in the months ahead.”

“Certainly, more consumers now expect substantial follow-on rate rises.

“Amongst those surveyed after the RBA decision, 80 per cent expect rates to move higher over the next year with 53 per cent expecting a rise of 1pt or more — up from 76 per cent and 48 per cent, respectively, in the January survey,” Mr Hassan said.

[Related: Property leaders cagey on 2023’s 1st rate hike]


worried anxious woman ta bwo rd


You need to be a member to post comments. Become a member for free today!
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more