Optimism despite mortgage rates rise

CONSUMER sentiment has risen despite banks increasing rates on interest-only mortgages, but pessimists still outnumber optimists.

The latest WestpacMelbourne Institute Index of consumer sentiment has risen 0.4 per cent to 96.6 in July, compared with 96.2 in June.

Westpac chief economist Bill Evans said it was the eighth consecutive month for the index to print below 100, which means the pessimists outnumber the optimists.

However, Mr Evans he said the lift in the index was a good sign considering the out-ofcycle interest rate rises.

“Developments around interest rates during the month could have been much more damaging for confidence than what turned out to be the case,” he said.

“Banks increased rates on ‘interest-only’ mortgages while there was considerable media speculation about prospects for rising rates overall (in July).”

He said confidence among survey participants with mortgages actually rose 4.8 per cent, while people aged 55 and over who have higher exposure to investor housing recorded a 10 per cent drop in confidence for the month.

Westpac continues to expect the Reserve Bank will keep the cash rate at a record low of 1.5 per cent for the rest of the year due to a slowing housing market, cautious consumers and a weakening jobs market with slow wages growth.