Photo by Tyler Nix on Unsplash
Photo by Tyler Nix on Unsplash
CommBank's spending intentions data released today revealed owner-occupiers flocked to low-rate, fixed mortgages in May.
Overall, there was a stabilisation in household spending intentions in May, after a fairly sharp decline in April, according to the Commonwealth Bank's monthly household spending intentions report.
Home buying intentions were one of the weakest areas of spending intentions in April, however that stabilised in May, driven by an increase in mortgage applications.
In particular, owner occupiers are continuing to lock-in fixed rate mortgages, with many mortgage products now firmly in the low-2.00% range, as can be seen in the table below.
|Advertised rate||Comparison rate*||Monthly repayment||Rate Type||Offset||Redraw||Ongoing Fee||Upfront Fees||LVR||Lump Sum Repayment||Additional Repayments||Pre-approval|
|No ongoing feesFree redraw facility|| |
Live-in Fixed Loan (Principal and Interest) 1 Year
|NO UPFRONT OR ONGOING FEES|| |
Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years
Fixed Rate Home Loan (Principal and Interest) 3 Years
Tailored Home Loan Fixed (Interest Only in Advance) 2 Years
Fixed Options Home Loan (Interest Only) 2 Years (LVR < 70%)
Fixed Rate Home Loan (Interest Only) 4 Years (LVR > 80%)
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of January 18, 2022. View disclaimer.
Judging from the chart (at foot of article), owner-occupiers now make up nearly half of all fixed rate mortgage loan books.
Traditionally, fixed-rate home loans were heavily favoured by investors, but less so by owner-occupiers.
CBA chief economist Stephen Halmarick pointed to a potential 10% fall in home prices for the remainder of 2020, but said there are signs the falls may not be as bad.
Previously, CBA economists predicted a 'worst case scenario' of home prices falling by up to 32%.
Spending in retail and eating out increases as restrictions ease
Many sectors in CommBank's household spending intentions report were either flat or in decline, with retail spending the only sector experiencing upwards trajectory.
This was buoyed by food, general retail and household furnishings, according to Mr Halmarick.
“It is also worth noting that a larger share of retail sales is now likely flowing through credit/debit card spending, rather than by cash," he said.
"Cash withdrawals by CBA personal account holders from ATMs, EFTPOS and branches is down 29% [for the] year in May."
CBA's card spending data also released today revealed a decrease in online sales, with in-store spending picking up, according to CBA's head of Australian economics Gareth Aird.
"Growth in online spend looks to have peaked, while the easing in restrictions has seen in-store card spend lift," he said.
"Growth in CBA in-store household card spend continues to track higher than in-store merchant spend, reflecting the impact that a lack of foreign tourists is having on overall expenditure."
Food goods expenditure has also plateaued, after peaking in March and April, largely due to hoarding, while food services has picked up again due to eating-out restrictions having been eased.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
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