Home loan rate rise fears dent confidence
FEAR of rising home loan rates and political uncertainty could be behind the fall in consumer confidence in November, with pessimists now outnumbering optimists.
The Westpac Melbourne Institute Index of Consumer Sentiment fell 1.7 per cent in November to 99.7, ending the previous month’s short-lived recovery and taking the index below the 100-point mark, above which optimists outnumber pessimists.
Westpac chief economist Bill Evans said the mood among consumers has largely been downbeat in 2017 as people felt pressure on their family finances.
“Constant media coverage around the prospect of rising interest rates may be unnerving households,” Mr Evans said.
Confidence among consumers with mortgages fell 4.5 per cent, while mortgage free home owners experienced a more modest 1.4 per cent fall, and tenants had a 0.5 per cent increase in confidence.
Economic uncertainty also weighed on consumers’ sentiment with confidence about the outlook for the next 12 months falling by 6.2 per cent.
The ongoing citizenship saga plaguing federal parliament was a likely cause Mr Evans said.
Consumers’ willingness to spend on major household items fell by 3.3 per cent, erasing almost all of last month’s gain.
“The sluggish spending evident through most of 2017 is likely to extend into year-end,” Mr Evans said.
Mr Evans said the result suggested retailers were in for a repeat of last year’s lacklustre Christmas spend.
The fall in consumer sentiment was recorded despite consumers’ confidence about employment levels increasing, improved sentiment towards home purchasing and the Reserve Bank showing no sign of increasing rates.
Mr Evans said a decrease in the Reserve Bank’s forecast for inflation in 2018 to below the 2 to 3 per cent target zone made the prospect of a rate rise next year unlikely.
“We are maintaining our long held view that rates will remain on hold through 2018,” Mr Evans said.