- 44% of Aussies lack confidence in the Government and RBA to keep cost of living pressures down
- 48% of homeowners with a mortgage don't know how much their rates have risen by
- Only 15% have successfully refinanced
The cost of living crisis has hit Aussie wallets for six, but while the credit crunch has hit hard, the message has not hit home.
A new survey of over 2,000 Australian adults has found that while many are seeing groceries cost more, only one in four has actually found a way to keep costs down.
Real estate is also seeing curious behaviour, while mortgage holders are feeling the pinch, they need only look in the mirror to find the real grinch: over three out of four Aussies are failing to actively reduce their mortgages by refinancing or cutting their costs.
Easing cost of living pressures, and inflation rises
Canstar’s sixth annual Consumer Pulse Report has found that Australians aren’t satisfied with the way Government and the Reserve Bank of Australia (RBA) are dealing with the rising cost of living.
The survey of 2,157 Australian adults saw some 44% say they are not confident with whether the Government and RBA will be able to ease inflationary pressures and the cost of living for Australians in 2023. Some one in four (27%) were slightly confident, 19% somewhat confident, and 9% very confident; the findings were rounded to the nearest whole percentage point and may not perfectly add up.
“The nation is speaking about its concern for the year ahead and whether people have faith in the Government’s and Reserve Bank’s ability to gain control of inflation and bring down living costs in 2023,” said Canstar’s finance expert, Steve Mickenbecker.
“Females are more pessimistic than males that costs will come down, with more than half – 51 per cent – of Australian women saying they are not confident the Government and Reserve Bank will be able to make a difference compared to 37 per cent of men.
“Even among those who are more optimistic, half only describe themselves as slightly confident.
“The Reserve Bank expects inflation to peak at over 8 per cent in December, a number that if sustained could do severe damage to the economy and peoples’ living standards for quite a while to come. It would also mean further home loan interest rate rises into the future, which will be particularly damaging to potential first home buyers.”
Inflation is front of mind for Australians, with almost three out of five ranking groceries, rent, power bills, interest rates or petrol as their number one concern for 2023.
“The mix has changed from an overwhelming concern in previous years about the cost of electricity and gas and is now more evenly spread. This is in spite of Australians reporting their average quarterly electricity bill has risen by 4.5 per cent over the year to reach $371 while their gas bill has gone up 13 per cent over the same period and is now on average $265 per quarter,” said Mickenbecker.
“Just putting food on the table is Australians’ number one worry next year and rightly so with more than two-thirds – 67 per cent – of Australians reporting their average weekly spend at the grocery store has increased as a result of rising prices. A further 26 per cent have found a way to keep the cost down, by buying less, choosing cheaper options or shopping for discounted prices.
“Most Australians have come to realise that the days of ballooning wealth from rising property prices and rampant discretionary spending, both courtesy of low interest rates and inflation, are behind them for now. We are living in an alien era of austerity that was owned by prior generations.”
What’s the relationship between house prices and inflation? The Property Tribune covered the issue earlier this year, with the crux of it is, alas, complicated.
Interest rates impact mortgages
The survey uncovered an unsettling admission from Australians:
“… almost one in two (48%) home owners with a mortgage and 37% of investors with a loan are unsure how much their mortgage interest rate has risen since the RBA started aggressively lifting interest rates in 2022.”
Steve Mickenbecker, Canstar’s finance expert
Interest rate ignorance is not the only concern, with the survey finding that two in five (39%) homeowners and over one in four (27%) investors are not prepared for even more interest rate hikes.
“The cash rate could reach as high as 3.85 per cent next year, pushing the average variable rate for existing borrowers up to 6.73 per cent and adding since April more than $1,130 to monthly repayments on a $500,000 loan over 30 years,” said Mickenbecker.
“The repayment increase is a considerable amount for any household to fork out and while cutting back might help, one of the best ways for mortgage holders to prepare for even higher interest rates is negotiating a lower rate with their lender or switching in chase of a better deal.”
Refinancing deals and cheaper loans
Only a paltry 15% of mortgage holders said they switched loans in the past year and secured a better deal, while only 8% tried and failed. This means more than three out of four (77%) of Australians are missing out on home loan deals, paying through the nose of home loan laziness:
“It’s disappointing that borrowers are not more engaged with getting a better deal, either from their own bank or by switching banks. Most borrowers are paying interest rates well above the relatively low rates being offered to new customers, and the monthly savings are too big to ignore,” said Mickenbecker.
“Borrowers can’t wait until they are unable to pay the bills to refinance into a lower rate loan. By then their desperation will be matched by lender aversion and they may find themselves out of luck with new lenders.”
With the pressure mounting, the survey found almost a third (31%) of Australians are considering selling their homes or investment property.
“When asked if they are concerned about property prices falling in the next two years, almost half – 49 percent – say no, 15 percent are unsure and only just over one-third – 36 percent – of respondents say they have some worry and will reconsider some decisions relating to accessing their equity, buying an investment property, planning for retirement and their investment strategy,” said Mickenbecker.
“In fact nearly two-thirds – 60 percent – of respondents expect house prices in their state to remain stable, grow or possibly even skyrocket at some point before the end of 2024.
“Given the contrary view of many property market experts, the confidence Australians have in stable or growing property prices is surprising. Perhaps the opinion reflects a long-term rosy view of property, which is held by the almost 70 percent of homeowners not planning to sell in the next few years.”
