Confidence among Australians with a mortgage has fallen to its weakest level on record, as the latest rate rise and stubborn inflation weigh on household budgets.
The Westpac–Melbourne Institute survey found sentiment among mortgage holders dropped 11.6% in November to 68.1, the lowest reading on measures dating back to 1994. The survey of 1,200 adults was conducted from 2 to 6 November.
The broader Consumer Sentiment Index slipped 2.7% to 78.2, down from 80.4 in October and its weakest result since late 2022. The decline was driven mainly by a sharp drop in expectations for the economy over the next year. That component fell 10% to 70.3, its lowest point since August 2020.
Westpac head of Australian macro-forecasting Matthew Hassan (pictured) pointed to petrol prices nearing $2.40 a litre, annual inflation reaching 4.3% and the Reserve Bank’s latest hike to 4.85%.
“Cost-of-living concerns remain front and centre,” he said.
The house price expectations index fell 13.4% to 99.6, its first net negative reading since November 2022 and the second-largest monthly fall since the COVID period.
“Consumers are no longer positive about the house price outlook,” Hassan said.
Respondents were evenly divided, with just over 38% expecting prices to fall and 38% expecting a rise. Queensland recorded the sharpest downgrade, with expectations falling 32% to 86, followed by Western Australia and South Australia. Victoria held up best, recording a modest 2.4% decline to 113.
The shift follows a run of actual declines, with home values falling for a seventh straight month in October, according to both Cotality and PropTrack. Cotality recorded a 1.2% national drop for the month.
Despite the gloom, buyer attitudes improved slightly. The “time to buy a dwelling” index rose 1.3% to 89.6, with buyer sentiment close to neutral in Victoria but much weaker in Western Australia and Tasmania.
Hassan said that “at least some consumers are starting to see lower prices as a potential buying opportunity.”
Most borrowers still expect further increases. Among those surveyed after the 3 November RBA decision, 72% expected mortgage rates to rise over the next 12 months, down from 80% in October.
Westpac expects the RBA to hold the cash rate at its December meeting. It doesn’t expect a hike in February either, although it noted that high inflation will continue to test the central bank’s resolve.
Household caution is also showing up in holiday budgets. Ninety-two per cent of mortgage holders plan to spend the same as or less than last year this Christmas.
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