Mortgage brokers face a more cautious consumer in early 2026 as households brace for higher mortgage rates and a softer economy, despite a small lift in confidence.
The latest Westpac–Melbourne Institute survey shows shoppers and borrowers remain firmly cautious, a backdrop that could weigh on borrowing capacity for first‑home buyers and property investors.
That keeps the index well below the 100 neutral level, indicating more pessimists than optimists.
Current conditions have improved slightly, but expectations for the year ahead point to a tougher economic outlook, influenced in part by the escalating conflict in the Middle East.
For brokers, the detail on housing is critical. Consumer sentiment towards property softened again in March, with the ‘time to buy a dwelling’ index slipping to a new cycle low.
Even so, the latest available lending data – for the December quarter – suggest activity was still flowing through to the finance market at the end of last year. According to ABS, the total number of new loan commitments for dwellings rose just over 5% in the December quarter, with first‑home buyer loan numbers up nearly 7% and the value of these loans rising more than 15% over the quarter.
Demand is especially fragile among existing borrowers: sentiment “weakened sharply amongst households with a mortgage, dropping 16% to just 73”, signalling more hesitation around upgrading or taking on larger debts as mortgage rates rise.
By contrast, renters reported a 10% rise in their assessment of buying conditions, and outright owners were relatively steady, suggesting selective opportunity for first‑home buyers who can secure finance.
Across states, affordability pressures were most acute in Queensland and Western Australia, where strong price growth has pushed buying sentiment to particularly weak levels, while regional areas saw a solid rebound in confidence.
Much of the gloom centres on rates. Hassan points out that “there remains a strong consensus view that interest rates will rise further from here – over 75% of consumers expect mortgage rates to increase over the next 12 months.”
That view has been reinforced by RBA’s latest move on the cash rate. At its February meeting, the board lifted the cash rate to 3.85%, emphasising that inflation pressures and resilient demand still warrant a restrictive stance.
Consumers are also retreating to safer places for their cash. Hassan notes that “Consumer savings attitudes continue to show a clear aversion to risk … ‘safe options’ are still generally favoured, with 22% nominating ‘pay down debt’ and 28% nominating ‘bank deposits’.”
With RBA seen as more likely to lift again in May rather than March, brokers may find clients prioritising debt reduction and rate protection over aggressive new borrowing.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
