Consumer Sentiment surges, housing confidence reaches a seven year high

Consumer Sentiment surges, housing confidence reaches a seven year high

The backdrop of a pandemic is unlikely to affect people spending money over the Christmas holidays -- and that could include signing the deed to a new house.

People didn’t want to spend their money at the start of the COVID-19 pandemic, but relief measures have buoyed their spirits and pushed consumer confidence to a high not seen in seven years, according to the Westpac-Melbourne Institute Index of Consumer Sentiment.

The monthly index, based on a national survey of 1200 adults conducted in the first week of November, lifted by 2.5 per cent to 107.7. The index is now 35 per cent higher than it was in August, and at a high not seen since November 2013.

“Given the high degree of uncertainty this Christmas, and the headwinds from the high unemployment rate, it is a very encouraging sign that Australians are planning for a ‘normal’ Christmas,” Bill Evans said, chief economist at Westpac.

Similarly, the ANZ-Roy Morgan consumer confidence rating increased over the week. Its level of 103.11 still trails the 30 year average of 112.6, but has improved by 57.9 since the pandemic caused it to hit a record low in March.

We’re in a pandemic, so why the confidence?

Promising COVID-19 numbers coming out of Victoria left people feeling the pandemic could be managed while allowing some semblance of ordinary life, the Index found.

“Victoria’s ‘ring of steel’ has come down (reuniting Melbourne and regional Victoria) and NSW continues to successfully suppress virus flare-ups,” Ryan Felsman said, senior economist at CommSec.

“... With health authorities’ successfully containing the virus, Aussie households -- armed with record-low mortgage repayments, savings and government income support -- are showing increased appetite for making a major household purchase.”

Confidence in Victoria surged by 9 per cent for the month of November. New South Wales, however, coming off a 17.5 per cent jump a month earlier, dropped by 5.5 per cent.

A housing resurgence

During the week the survey was being conducted, the Reserve Bank of Australia (RBA) announced the cash rate would be extraordinarily cut to 0.10 per cent, leading to multiple banks offering fixed interest rates below the “psychologically uplifting” 2 per cent.

The boost to housing affordability -- already at its best levels in a decade -- led to the Index’s ‘time to buy a dwelling’ sentiment to jump 8 per cent to 132, its highest level in seven years.

“Without doubt this survey is signalling a strong resurgence in the housing market,” Westpac’s Mr Evans said.

“For now, the boost from record low interest rates is clearly over-riding negatives around high unemployment; the overhang of deferred loans; the prospect of withdrawal of significant fiscal support; slow population growth; and rising vacancy rates.”

Sentiment jumped in NSW by 9 per cent and Queensland by 12 per cent. Even Victoria posted a lift of 5 per cent, indicating a “solid recovery” could be underway.

High unemployment, but Christmas spending within normal levels

The RBA anticipates the unemployment rate will reach 8 per cent by the year’s end, a notable increase over its typical level of about 5.5 per cent.

And the sentiment was reflected in the Unemployment Expectations Index. It posted a 6.2 per cent increase -- indicating an expected rise -- but was 19.7 per cent below its peak following the COVID-19 pandemic in April.

The high unemployment isn’t expected to affect Christmas shopping by much -- due in part to comprehensive government stimulus payments. About 11.5 per cent of people surveyed expected to spend more, while 32.3 per cent of people planned to spend less -- but the latter was within the five year average.

“This will be a particularly welcome sign for Australia’s retailers heading into the critical Christmas high season,” Mr Evans said.

Spending has already increased, CommSec said.

“Aussies have already begun spending with their pay packets boosted this week by the Federal Government’s tax cuts,” Mr Felsman said.

Citing CBA’s credit and debit card data, he said spending had increased by 13.2 per cent in the week when compared to the same period a year ago, and the rise was coming off an increase of 5.7 per cent the week before.

Did you find this helpful? Why not share this news?



Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy


Learn more about home loans

What is a valuation and valuation fee?

A valuation is an assessment of what your home is worth, calculated by a professional valuer. A valuation report is typically required whenever a property is bought, sold or refinanced. The valuation fee is paid to cover the cost of preparing a valuation report.

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

What do mortgage brokers do?

Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

While bank staff recommend home loan products only from their own employer, brokers are independent, so they can recommend products from a range of institutions.

Brokers need to be accredited with a particular lender to be able to work with that lender. A typical broker will be accredited with anywhere from 10 to 30 lenders – the big four banks, as well as a range of smaller banks, credit unions and non-bank lenders.

As a general rule, brokers don’t charge consumers for their services; instead, they receive commissions from lenders whenever they place a borrower with that institution.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

Mortgage Calculator, Loan Amount

How much you intend to borrow. 

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender. 

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.