Borrower confidence has collapsed to record lows, with households still bracing for further increases in mortgage rates.
Australian mortgage holders have recorded historically weak sentiment readings in separate ANZ–Roy Morgan and Westpac–Melbourne Institute surveys, as elevated interest rates and living costs deepen concerns about household finances.
Released on 10 November, the surveys showed borrowers’ confidence falling to lows not previously recorded across their respective histories, following the Reserve Bank of Australia’s (RBA) fifth cash rate increase this year.
Westpac’s mortgage-holder sentiment measure slumped 11.6 per cent in November to 68.1, its lowest reading in records stretching back to 1994.
Australia and New Zealand Banking Group (ANZ) separately reported that mortgage-holder confidence reached its weakest level since its weekly series began in 2008.
The findings follow the RBA’s 3 November decision to lift the cash rate 0.25 percentage points to 4.85 per cent, its highest level since 2008.
Borrowers brace for further mortgage rate increases
Westpac’s head of Australian macro-forecasting, Matthew Hassan, reported that 72 per cent of respondents surveyed after the RBA decision expected mortgage rates to increase over the next 12 months.
Although down from 80 per cent in October, that majority underscores persistent concern about further tightening.
The Westpac–Melbourne Institute Mortgage Rate Expectations Index eased 1.1 per cent to 177.8 but remained near recent peaks.
Across the broader population, Westpac’s Consumer Sentiment Index declined 2.7 per cent to 78.2 in November, from 80.4 in October.
That was its weakest result since late 2022, when annual inflation was approaching 8 per cent and households were confronting a rapid interest rate tightening cycle.
Westpac said similarly depressed readings before that period had been confined to major economic shocks, which included the onset of COVID-19, the global financial crisis and the recessions of the early 1980s and early 1990s.
The ANZ–Roy Morgan survey also showed widespread weakness, with overall confidence dropping 3.1 points to 63.1 last week, the third-lowest result since the broader series began in 1973.
ANZ attributed the deterioration primarily to weaker assessments of personal finances, with confidence declining across every housing cohort.
The survey followed governor Michele Bullock’s warning that the economic outlook would “feel like it’s a recession”.
Spending outlook weakens as inflation complicates rate forecasts
However, ANZ’s inflation expectation measure moderated despite the confidence slump, with weekly expectations falling 0.2 percentage points to 5.9 per cent, while their four-week average eased 0.1 percentage points to 6.1 per cent.
ANZ economist Sophia Angala nevertheless cautioned that inflation expectations remained a potential obstacle to an end to tightening.
“We think the cash rate has likely peaked at 4.85 per cent, although the risks remain tilted towards further tightening given the RBA’s concern about inflation expectations,” she said.
“Together, elevated rates and historically weak confidence are likely to weigh on household spending.”
Westpac’s purchasing indicator reinforced that concern with the bank’s “time to buy a major item” sub-index falling 3.7 per cent to 80, sitting more than 40 points below its long-run average of 123.
Only 15 of the 623 surveys conducted since the mid-1970s had produced weaker readings.
Looking ahead, Hassan said the RBA appeared likely to pause in December to assess the effects of earlier increases, leaving February as the next likely meeting for active consideration of another rise.
“On balance, we do not expect a cash rate increase in February. However, high inflation will continue to test the RBA’s resolve,” Hassan said.
[Related: Mortgage growth flatlines at Australia’s biggest banks]
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