Mortgage brokers in Australia believe that a rise in interest rates will affect consumer spending habits more significantly than mortgage repayments and property spending, while most expect the RBA to raise the cash rate in November.
A new survey of mortgage brokers from Australia’s leading home loan market Knight tournament asked a number of questions about the upcoming rate hikes both in November and over the next 12 months, where we will see the biggest inflows and how the recent changes have affected their business.
With inflation hitting 7.3% last week, the highest level since 1990, 100% of brokers agreed that spending habits will continue to change significantly in the coming months. A majority (75%) also believed that mortgage repayments would remain sensitive. Fewer brokers (12.5%) believed that the biggest changes would occur in personal income and real estate investments, while 1 in 4 respondents suggested that overall real estate costs would be significantly impacted by future rate increases.
While most brokers (87.5%) predict the RBA will raise the cash rate again in November, there was less consensus on how high the rate will go next year. 50% assumed the cash rate would rise by 4% or more over the next 12 months.
The survey also asked brokers to describe the impact of recent rate changes on their business, with the overall sentiment being, unsurprisingly, that customers are more nervous and that brokers are seeing a decrease in homebuyer inquiries in favor of an increase in borrowers looking to refinance.
Knight tournament CEO Carl Hammerschmidt (pictured) said: “This month we wanted to get a sound check from our broker partners on their expectations of how the rise in the cash rate will affect the average consumer. Perhaps unsurprisingly, given how Australians are struggling with the rising cost of living, consumer habits were the one area where all our brokers agreed we would continue to see big changes in the coming months.
“What’s interesting is that there are still different opinions about how high the rates will be next year. We found that there is an even split between those who believe rates will rise by at least 4% and those who believe rates will rise no more than 3.5%. I wholeheartedly agree with the key sentiment emerging from the survey, that most brokers encourage borrowers to focus on smart spending and borrow with a bigger buffer than the banking calculator might allow.’