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.
Base criteria of: a $400,000 loan amount, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the product provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 01 July 2020. 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 which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
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.
In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*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.
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