Mortgage holders have seen their confidence drop by a margin much higher than an overall decline in consumer confidence this month.
The Westpac-Melbourne Institute Index of Consumer Sentiment has fallen in April, down 1.6% from March. Westpac chief economist Bill Evans said the decline was “a mild surprise”, and noted that homeowners seemed to be disproportionately affected by the drop.
“Over the last 12 months the standard variable mortgage rate has fallen by 0.4% yet the confidence of respondents who hold a mortgage has fallen by 14.6%,”
Overall, the confidence of borrowers fell 5.1%, while the confidence of tenants actually saw a 7.4% increase. Consumers were also dour on the current state of their own finances. Evans said the result was plumbing the depths of the Index’s historical findings.
“Respondents' spending behaviour is likely to be considerably influenced by how they assess their own finances. As such, the very weak reads in April are of significant concern. Apart from the one observation in July 2008 when respondents were gripped with concerns over the Global Financial Crisis and mortgage interest rates hit 9.6% the read in [this] survey on their assessment of finances compared to a year ago is the lowest since the recession in the early 1990s,” he said.
Consumers weren’t much sunnier about the future for their finances either. Evans said the sub-index tracking households’ financial expectations for the coming year fell 4.1%.
“Their outlook for finances over the next 12 months is still better than during the July/August period last year, in July 2008 and that readings a few months prior to the introduction of the GST in 2001, but apart from that we need to go all the way back to the early 1990s to see lower prints,” he said.
Evans said a variety of domestic factors are continuing to rock consumer confidence.
“With fears of rising interest rates or a second global financial crisis having eased we can only conclude that concerns around job security, house prices, high debt levels, petrol prices, utility costs and uncertainty around the imminent introduction of a price on carbon are weighing heavily on households' concerns about their financial position,” he said.