ISCOVER
Cash rate relief has helped lift consumer sentiment for home buyers and mortgage holders.
Home buyer sentiment is at its highest level in more than four years, according to the Westpac–Melbourne Institute Consumer Sentiment Index.
The index, which tracks consumers’ views on whether it is a good time to buy a dwelling, rose 10.5 per cent in August to an almost neutral level of 97.8, 37 per cent higher than the same time last year.
According to research, which surveyed 1,200 adults between 11 and 15 August 2025, sentiment has risen as the Reserve Bank of Australia’s (RBA) third rate cut of the year boosts confidence for home buyers and mortgage holders.
However, consumers expect prices to rise over the next year, as the price expectations survey continued to hover around its record high.
The Westpac–Melbourne Institute Index of House Price Expectations inched up 0.9 per cent to 164.2. The result is the second-highest since December 2013 and not far-off the highest index score, of 166.5, achieved in June 2025.
The measure highlighted that three-quarters of consumers expect prices to rise over the next 12 months. Price expectations are stronger in NSW (169), Queensland (169), and Western Australia (168), but a little weaker in South Australia (159) and Victoria (157).
Overall consumer sentiment lifted to its highest level in three and a half years, with the Westpac–Melbourne Institute Consumer Sentiment Index rising 5.7 per cent to 98.5 in August, from 93.1 in June.
It has been 42 months since Australian consumers last registered a reading above 100 (positive) on the Westpac–Melbourne Institute Index – the second-longest period of continuous pessimism since the survey began in 1974 (second only to the recession of the early 1990s).
However, the long run of consumer pessimism may finally be coming to an end, as the Index is now just 1.6 per cent away from being back in net-positive territory.
Broader consumer sentiment gains were not confined to, or even led by, the mortgage belt, Westpac research noted, despite being one of the groups set to directly benefit the most from lower interest rates.
Some of the strongest improvements in August were among renters, suggesting that easing cost-of-living pressures, including slower growth in rents, have also benefited consumer sentiment.
However, the mortgage belt has seen a bigger improvement in sentiment around finances since the middle of last year.
Commenting on the improved consumer sentiment, Westpac’s head of Australian macro-forecasting, Matthew Hassan, said that the latest cash rate drop had “reinforced consumer expectations that mortgage interest rates are headed lower, giving a broad-based boost to sentiment”.
Separate research in the ANZ-Roy Morgan Consumer Confidence Index found that while consumer confidence was virtually unchanged last week, on a four-week moving average, the series continues to move upward and is at its highest level since June 2022.
Consumer confidence in this index saw mortgagor confidence increase by 2.1 points last week, while for home owners, it dropped by 2.6 points.
On a four-week moving average basis, confidence among mortgage holders was at its second-highest level since May 2022, which was when the RBA first started increasing the cash rate following its emergency low setting.
Commenting on the trends, My Bui, AMP Bank economist, said: “The increase in consumer confidence this month is unsurprising, likely thanks to the RBA’s August rate cut and stable inflation outlook (despite a lower cash rate assumption).
“Nevertheless, it is very encouraging to see the renewed momentum in consumer sentiment after months of stagnation, as rising consumer sentiment can signal improving household spending trend. It is also consistent with an improving misery index over the past year.”
[Related: Capitals drive sixth straight month of home price gains]
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