Confidence plunges
ANZ-Roy Morgan sees consumer confidence down another -4.5 per cent, to the lowest level since April 2020.
The Westpac-MI gauge has consumer confidence is now also at the same levels we saw in the depths of the global financial crisis.
Partly for this reason, CBA's Gareth Aird sees the cash rate target peaking at around 2.6 per cent, before being dropped to around 2 per cent.
Source: CBA
Financial markets beg to differ, seeing pressure on labour costs pushing the cash rate target to above 3 per cent by 2023 (a view supported by the data in the NAB Survey up to July).
Lending buffers
With Australia's 3-year bond yield trading at under 3 per cent, this does call into question whether home loan borrowers still need to be assessed with a 3 percentage points buffer.
The Bank of England has scrapped its 3 percentage points buffer, partly on the basis that the tightening cycle is now well underway.
Since October 2021, borrowers in Australia have also been assessed with a huge 3 percentage points buffer, but since there is no basically chance of the cash rate target rising by that amount from here, the buffers could/should be reduced from next month (when the cash rate target will be 2.35 per cent) to give more breathing space for refinancing.
More here (or click on the image below):
Australia's has a 'cliff' of fixed rate borrowers rolling off low mortgage rates over the next 18 months.
Many of these borrowers will face an unexpectedly huge lift in mortgage repayments, and deserve a chance to refinance, instead of being trapped with poor terms with one lender.
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{h/t Ben Kingsley, Empower Wealth, PICA Board}
