Mortgage holders hit their gloomiest mood since 1994 as consumer sentiment sinks to a four-year low

Australians with a mortgage are now gloomier about the economy and their own finances than at any time in more than three decades of records, as the Reserve Bank’s run of rate rises bites into household budgets.

The Westpac-Melbourne Institute Consumer Sentiment Index fell 2.7% to 78.2 in November, from 80.4 in October, Westpac said on Tuesday morning. It is the third monthly fall in a row, after drops of 5.2% in September and 4.7% in October, and the lowest reading since late 2022. The index is down almost 25% on a year earlier.

Among mortgage holders, sentiment fell 11.6% in a single month to 68.1, the weakest result on measures going back to 1994.

“Australian consumers remain deeply pessimistic, sentiment continuing to plumb extreme lows,” said Matthew Hassan, Westpac’s head of Australian macro-forecasting.

How bad is 78.2?

The index is built so that 100 is the point where optimists and pessimists are evenly balanced. A reading of 78.2 means pessimists outnumber optimists by a wide margin.

Westpac says readings this weak have been seen only a handful of times: at the onset of COVID, at the height of the global financial crisis, in the early-1990s and early-1980s recessions, and during the rate rises of late 2022. This time there has been no recession and no pandemic. The gloom is being driven by prices and borrowing costs.

What is pulling it down?

The November survey was taken after the Reserve Bank raised the cash rate by another 0.25 percentage points to 4.85%, an 18-year high and the fifth rise of 2026.

The biggest single fall was in how people see the economy over the next 12 months, down 10.2%. Confidence that now is a good time to buy a major household item fell 3.7%, a warning sign for retailers heading into Christmas. Westpac also reported a big downgrade in expectations for house prices.

The pressure points are familiar to anyone filling a car or paying a bill: petrol prices pushing towards $2.40 a litre and official inflation measures at 4.3% a year. Westpac said a positive reaction to the US midterm results was “swamped” by inflation and interest rate worries.

Do people expect more rate rises?

Yes. “Consumers are bracing for more rate rises,” Hassan said.

Westpac’s mortgage rate expectations index slipped 1.1% to 177.8 but remains near its recent peak. Of those surveyed after the Reserve Bank’s latest decision, 72% expect mortgage rates to rise over the next year, down from 80% in October but up from 64% in September.

Concern about losing a job is rising gradually, Westpac said, though consumers are not yet alarmed about unemployment.

What does it mean for households and businesses?

Consumer sentiment matters because household spending makes up around half of the Australian economy. When people feel this pessimistic, they cut back on the things they can delay: furniture, cars, holidays, renovations.

Westpac said Christmas spending plans show mortgage holders tightening their belts, the group that has carried the full weight of every rate rise this year. For a household with a $600,000 loan, each 0.25 percentage point rise adds roughly $100 a month to repayments, so five rises this year add up to around $500 a month.

For the Reserve Bank, the survey is a signal that its rate rises are reaching household confidence. Whether that is enough to bring inflation down from 4.3% is the question for its next decision.