RBA holds Cash Rate Steady, with Borrower Stress at Record High.
Sydney WEDNESDAY 2 August 2023 – Embargoed until 00:01 AM AEST on 2 August 2023
- August 1st – RBA holds cash rate at 4.1%
- Mortgage stress at all-time-high, following slight dip post April rate pause.
- Rising cash rate has now overtaken inflation as primary driver of mortgage stress.
Cash rate holds – and the timing couldn’t be better for stressed Aussie Households
From a record low of 0.1% in April 2022, as of Tuesday 1st August, the RBA has held the Australian cash rate at 4.1%.
In the wake of the RBA’s August rate pause (after 13 hikes in 15 months), data from leading financial insights provider RFI Global shows Mortgage Stress in Australia now sits at an all-time high, with yesterday’s pause providing welcome relief to hundreds of thousands of households and borrowers.
Since its tracking began, and certainly since its previous peak in March 2020, Borrower Stress now sits as high as 30%, following only a slight dip post the April rate hike pause. (The April dip following the pause is important, suggesting stress does decline, even if rates don’t go down immediately.)
With much attention focused on the cost-of-living, latest figures from RFI Global now clearly show interest rates and cost of repayments as causing maximum stress for Aussie borrowers.
Total household mortgages outstanding is at a record high of more than $2.1t, up 20% in just the past 3 years according to APRA. More than two-thirds of this debt is for the purchase of owner occupier housing. While refinancing fell by 3.1% in June 2023 according to the ABS’ Lending Indicators, it remains at a near record high of $20.2b, and 13% higher than 12 months earlier. This suggests more and more Australians are seeking better deals as they struggle to meet mortgage repayments, with repayment increases based on June’s rate rise only now starting to hit some consumers.
Savings buffers continue to dwindle.
Trended data analysed just this week shows that although the under 35’s bounced back a little in terms of their savings relative to May 2023, all segments still show a decline in total savings since November 2022.
RFI’s DBM Atlas data shows that Australian’s average total liquid assets peaked at just over $60,000 towards the end of 2022. This includes all their transaction and savings accounts, online savings, term deposits, offset, mortgage redraw, cash management accounts and share trading accounts.
Over the past 6 months however, these savings have been in steady and steep decline as consumers face increases in the cost of living, and mortgage customers cope with the interest rate hikes of the past 15 months.
On average, Aussies have eaten into their savings by almost $2000, however it is much more for some:
Consumer sentiment index update
RFI’s DBM Atlas Consumer Sentiment Index fell further in June to 84.9, the lowest reading since August 2020 when Australia faced COVID outbreaks without vaccines.
The decline has been driven by an increasing number of consumers who think they will be worse off financially in 12 months’ time (28% vs 18% in April 2022). Furthermore, 36% now think it’s a bad time to make discretionary spend compared with just 11% in April 2022.
Australians though, are still optimistic when it comes to Australia’s overall economic situation, with 39% believing the country will be better off in 12 months – only down 5%pts from 44% pre-rate rises in April 2022.
Relief…. For a month.
So, although August’s announcement has given borrowers a month’s breathing room, they naturally remain deeply concerned about the impact of further rate rises and their ability to meet repayments, until September – we hold our breath…
Notes for Editors:
About RFI Global
RFI Global was founded in Sydney in 2006 to provide financial intelligence for the Australian financial services market. It is now the #1 data and insight partner for the world’s financial services community, serving 49 markets with a local presence in Sydney, Singapore, Dubai, London, Paris, Toronto, New York, and San Francisco.
Since its inception, RFI has provided tailored subscription-based insight and data solutions for local, regional and global Financial Services players that enable them to make data-driven decisions confidently and quickly.
To learn more, please visit: www.rfi.global.
Since 1992 DBM has provided market research and consulting services to some of Australia’s largest B2C and B2B brands. The DBM Atlas program is used by more than 50 financial services brands to track key customer metrics such as advocacy, sentiment, product holdings and market share. Over recent years DBM have formed data partnerships to provide marketing solutions such as media planning, digital audience activation and geo-demographic targeting.
In April 2023 RFI Global acquired the DBM Atlas product, creating Australia’s most comprehensive financial services customer data set. To learn more, please visit https://www.dbmconsultants.com.au.
About RFI’s DBM Atlas Consumer Sentiment Index
RFI’s DBM Atlas Consumer Sentiment Index measures the level of consumer confidence in economic activity. A level below 100 represents pessimism outweighing optimism while a level above 100 represents optimism outweighing pessimism. The Index is an average of five component indexes which reflect consumers’ evaluations of their own personal financial situation and of Australia’s economic situation now (relative to 12 months ago), their expectations for their personal financial situation and for Australia’s economic situation over the next 12 months, and whether it is a good time to spend on discretionary items. The index is based on a survey of 5,000 Australian adults every month surveyed consistently throughout each month.
For more information or to speak with a Spokesperson, please contact: