- Inflation was recently recorded at 7.3%
- Interest rates are also expected to rise again in November
- A broker survey found more brokers expect spending habits to change than mortgage repayments
Last week, inflation rose to 7.3% with homes and petrol fuelling the rise. The cost of food and furniture also weighed on the results, with fruit seeing prices rise by over 6% and vegetables just under 3%.
The rising cost of living
Australian Bureau of Statistics (ABS) figures showed construction input costs over the September quarter rose again, albeit at a lower rate of 2.9%, compared to the past two quarters which saw 4% construction cost rises.
The ABS also said input prices rose 16% over the past 12 months, more than double the inflation rate, primarily due to material costs: timber, board and joinery (+2.8%) along with other metal products (+16.4%).
The impact on Australians is clear. Research from Mozo found three out of four Australians are concerned about their financial future.
“We are starting to see the full effects of back-to-back interest rate rises and skyrocketing inflation with the majority of Aussies now admitting they worry about their finances,” said Claire Frawley, Personal Finance Expert at Mozo.
More concerning is that, as we near the festive season, one in five of those surveyed they now spend several hours a day worrying about their financial future.
The research also found that grocery bills are now causing the same stress levels seen with those making repayments on a mortgage.
“Now is the time for people to really step back and cut waste out of their household budgets where possible, especially as end of the year creeps closer,” added Ms Frawley.
Curbing consumer spending
A new survey of mortgage brokers from around Australia, conducted by Joust, has found most brokers believe the rising interest rates will impact consumer spending habits more significantly than mortgage repayments and property costs.
The survey found that 100% of brokers agreed spending habits will continue to change significantly over the coming months.
A smaller but still significant number, 75%, believed that mortgage repayments will continue to be significantly impacted.
Fewer brokers (12.5%) believed that the biggest changes will be seen in personal incomes and property investments, while 25% of survey respondents suggested general property costs will see big flow-on impacts from future rate rises.
The survey also asked brokers to describe the impact of recent rate changes on their businesses, with the general sentiment unsurprisingly being that customers are more nervous and that brokers have seen a reduced number of home buyer inquiries, in favour of an increase in borrowers looking to refinance.
Joust CEO Carl Hammerschmidt said: “This month we wanted to get a sense check from our broker partners on their expectations for how the rising cash rate would impact the average consumer. Perhaps unsurprisingly given the manner in which Aussies are battling against rising living costs, spending habits for consumers were the only area that all our brokers agreed we’d continue to see big changes in the coming months.
“What’s interesting is that there is still a range of opinions on how high rates will go over the next year. We found there to be an even split of those who believe rates jump by at least 4% and those who think it won’t go up by more than 3.5%. I wholeheartedly agree with the key sentiment coming out of the survey, with most brokers encouraging borrowers to focus on wise spending and to borrow with a bigger buffer than what a bank servicing calculator may allow. ”
