Consumer expectations for higher variable rates have risen sharply, new Westpac–Melbourne Institute research has shown.
Expectations for variable mortgage rates to increase over the next year have jumped to a 14-month high, according to new research.
The Westpac–Melbourne Institute Mortgage Rate Expectations Index has found that consumer expectations for rising variable rates surged 17.1 per cent to an index score of 119.1.
The RBA held the cash rate steady at 3.60 per cent at its November meeting last week.
Responses over the course of the survey showed that more than three-quarters (76 per cent) of those surveyed in November – after the Reserve Bank of Australia’s (RBA) decision – expected mortgage rates to be the same or higher in a year’s time.
That compares to 60 per cent in October and 57 per cent in September.
Nevertheless, responses were generally less hawkish on the interest rate outlook.
“The RBA decision, it seems, was less unsettling than feared,” Westpac head of Australian macro-forecasting, Matthew Hassan, said.
“As we noted at the time, the bank could have sent a more hawkish message on inflation than it did. Instead, it assessed that some of the recent rise was due to temporary factors.”
Home buyer sentiment diverges
Home buyer sentiment was largely unchanged in November, with the Westpac–Melbourne Institute time to buy a dwelling index ticking down 0.1 per cent to 96.4.
However, there was a widening divergence across age groups, with a much more positive 115 read among those aged 18–34 compared to 87 for those aged 35–50 and 84 for those aged over 50.
The federal government’s expanded 5 per cent Deposit Scheme appears to be driving the big lift in buyer sentiment among younger cohorts.
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