Household Financial Confidence Waned In May

The results from the latest Digital Finance Analytics Household Finance Confidence Index to end May 2017 is released today, and shows a lower overall score of 100.6, down from 101.5 last month. This is firmly in the neutral zone, but households with mortgages are feeling the pinch and the index is set to go lower in months ahead.

Both property investors and owner occupiers are more concerned about rising mortgage interest rates, and potentially falling property prices. There was less change in households who are property inactive, which shows how the dynamics of property is directly influencing confidence, but this group has a lower level of confidence to start with.

The biggest slide was in NSW, where the overall score is still the highest across the states, but is turning lower. Talk of lower prices, is hitting confidence. WA confidence is rising a little, but from a low baseline and there were small rises in QLD and SA.

Looking at the scorecard which drives the index, we see households have become a little more concerned about future job prospects, are less comfortable with savings returns, but significantly more concerned about the debt burden they are carrying in the context of falling real incomes, whilst costs of living continue to spiral higher. This despite net worth still rising for many.

Sentiment in the property sector is clearly a major influence on how households are felling about their finances, but the real dampening force is falling real incomes. This is unlikely to correct any time soon, so we expect continued weakness in the index as we go into winter.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 52,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Finance Security Wobbles Again In April

Today we release the latest monthly edition of our household finance confidence index for April 2017, which show a fall from 102.5 to 101.5, just above the neutral setting.

The index is drive from the results of our household surveys, and highlights some important movements, mostly related to the recent changes in the property market.

Property Investor levels of confidence weakened, thanks to rising mortgage interest rates and concerns about property prices and pre-budget speculation about changes to negative gearing. In fact owner occupier households are now more confident than investors. As usual households without property interests have a significantly lower level of confidence about their financial status.

The results by state shows that NSW leads the way, with households there still enjoying the glow of stronger employment and economic growth, to say nothing of high home prices. More people of course own property than not. VIC continues to weaken, costs of living appear to be accelerating there (especially child care and school fees, plus energy and council rates). Most other states saw a small rise, though from a position below the 100 neutral point. The divergence across the states is becoming more extreme.

Looking at the scorecards, whilst job security is about the same, households were less comfortable with their savings, and debt. Mortgage rate rises are working their way through, and many households with deposits in the bank are still seeing lower returns.

Falling real incomes are a strong factor in the mix, together with rising costs of living. these combined explain the rise in mortgage stress. Net worth is still improving thanks to home price appreciation, other than in WA, regional QLD and TAS.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 52,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

 

Household Finance Confidence Wobbles

Digital Finance Analytics has released the latest edition of the Household Finance Confidence index, to end March 2017. The index fell slightly to 102.5 from 103.4, but is still slightly above a neutral setting.

Looking at the property segments, we find that whilst owner occupied households are a little more confident, property investor confidence fell, thanks to the recent noise about rising mortgage rates, possible changes to tax breaks and questions about future capital gains.

Looking across the states, confidence remains highest in NSW, but fell slightly in VIC. There were slight improvements in the other states.

Here is the scorecard which drives the index. Most striking is the fall in real incomes and small rises in concerns about job security. As interest rates rise, more households are concerned about debt. Despite this, property owning households saw their net worth rise.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 52,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Finance Security Index Higher Again In February

We have published the February 2017 edition of the Digital Finance Analytics Household Finance Confidence index (FCI) today, which shows a further small rise from the January 102.7 to 103.4. This is above the long term neutral setting, and after a significant dip in the past couple of years, the FCI is maintaining positive momentum.

However, the positive boost in predominately centered on momentum in the property market, with both owner occupied and investment property holders in positive territory, whilst those excluded from the property market, including renters and those living with family or friend get none of the upside, so their financial security is degrading further. This highlights the risks if the property market momentum were to reverse, and the bind that regulators face at the moment – do you keep the current settings and allow the market to continue to run, or tighten and risk reversing household sentiment and thus spending?

The state by state picture shows how uneven the confidence is, with households in the eastern states significantly more positive that in WA or SA.  WA grinds down, thanks to the pressure on the economy there, falling home prices and flat to falling incomes. Will the election result today make a difference?

Finally, here is the scorecard, which shows that real income in under pressure (up 1%), costs of living are rising (up 1%), concerns about debt levels are up a little (thanks to recent rate increases) but net worth is being bolstered by strong home price growth and rising stock markets.  The property sector is firmly linked to household confidence, and vice-versa.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Finance Confidence Slips After Christmas Binge

We have released the latest edition of the Digital Finance Analytics Household Finance Confidence Index, to end January 2017 today, which is a barometer of households attitudes towards their finances, derived from our rolling household surveys.

The aggregate index fell slightly from 103.2 in December to 102.68 during January, but is still sitting above a neutral measure of 100, and the trend remains positive. However there are a number of significant variations within the index as we look across states and household segments. These variations are important

First, the state scores are wider now than they have ever been, with households in NSW the most positive, at 110, whilst households in WA slip further to 81. Households in VIC and SA also slipped a little, whilst households in QLD were a little more positive.

The performance of the property market is the key determinate of the outcomes of household finance confidence, with those holding investment property slightly more positive than owner occupied property owners, whilst those who are renting, or living with family or friends are significantly less positive. Whilst some mortgage holders have received or expect to see a lift in their mortgage rate, this is offset by strong capital growth in recent months. The NSW property holders, especially in greater Sydney are by far the most positive. Renters in regional WA, where employment prospects are weaker, are the least positive.

Looking in detail at the drivers of the index, we see a rise by 1% of households who are felling less secure about their employment prospects – especially those in part-time jobs – and more are saying they are under employed.

In terms of the debt burden, there was a 4% rise in those less comfortable about the debt they hold, thanks to rising mortgages, the Christmas spending binge and higher mortgage rates.

More household are saying their real incomes have fallen, up 3%, whilst those who say their costs of living have risen was up 8%.

To offset these negative indicators however, some households reported better returns from term deposits and shares, as well as a significant boost to capital values on their property. Those who said their net worth had risen stood at 64%, up 5% from last month.  The property sector is firmly linked to household confidence, and vice-versa.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Positive Property News Supports Household Finance Confidence

The latest Digital Finance Analytics Household Finance Confidence Index, to end December is released today. Overall household confidence is buoyant, and above the neutral setting. Sitting at 103.2, it is up from 100.02 in November.

The property “fairy” has been generous in that property is the key to the index at the moment, with positive news on home price rises, and the effect of the low interest rates following the last RBA cash rate cut flowing through. Home owners with an investment property have now overtaken the confidence score of owner occupied property holders, but both are higher. Those households who are not property active however continue to languish.

We see significant state variations, with those in NSW and VIC most confident, whilst those in WA, although slightly higher, is significantly off the pace.  The impact of changes to the first owner grant there will not flow through into the results for some time to come.

The impact of positive property news has swamped a couple of the negative indicators. For example, more households are saying their costs of living have risen in the past 12 months.

In addition, real incomes, after adjusting for inflation are static or falling. Very few have had any pay rises above inflation, and many none at all.

So, it seems the future of household confidence is joined at the hip with the future of property. In the light of our recent mortgage default modelling, in a rising interest rate market, this may be a concern as we progress through 2017. But at the moment, households are having a party!

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Finance Confidence Higher Again

The latest data from the Digital Finance Analytics Household Finance Confidence Index shows a further improvement, with the November score now just above the 100 neutral position at 100.02. This is up from 98.2 in October, and the first time since 2014 we have been above the neutral setting.

fci-nov-2016-summaryThe full effect of recent rate changes and the availability of low-rate fixed mortgages, together with climbing home values in most states, combined,  have driven both home owners, and property investors confidence higher. In fact, for the first time in more than a year, property investors are more confident than owner occupiers. On the other hand, the one-third of households excluded from the property market drifted lower, thanks to higher costs of living and static or falling incomes.

fci-nov-2016-propertyLooking across the states, households in NSW are much more confident, with VIC slightly behind. Households in WA reported a fall in confidence, thanks to poorer employment prospects and falling home prices.

fci-nov-2016-statesjpgOn average households were a little less comfortable with the amount of debt they hold, thanks to expectations that interest rates have passed their low point, and will rise. 27.6% of households were less comfortable, up 3.9% from last month.

fci-nov-2016-debtWe also see a continued fall in real incomes, thanks to rising costs and flat or falling pay. 47.5% said their incomes had fallen, in real terms, in the past year, up 2.3% last month.

fci-nov-2016-income Households reported improved investment incomes from stocks and term deposits. However, appetite for investment property, especially down the east coast remains strong.

On average, younger households were less confident compared with those aged above 50 years.

By way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Financial Confidence Higher as Rates Fall

We release the October edition of the Digital Finance Analytics Household Finance Confidence Index (FCI) today. Overall average confidence is up again, as a direct response to the RBA rate cut, and property owning households are the more confident. The index reached 98.2, up from 97.1 last month, and is trending towards the long term neutral setting. Property Investors and Households with Owner Occupied property continue to move above the neutral setting, thanks to continued capital appreciation (in most centres) and lower mortgage rates and some rises in term deposit rates.  Those without property interests drag the average down, highlighting again how important property is to household finances.

fci-oct-16On a state basis, NSW and VIC are most positive. WA the least positive, reflecting falls in home prices, rising rental vacancies and less appetite for property.

fci-oct-16-states Household income, in real terms remain in the doldrums, putting more pressure on those with larger mortgages.

fci-oct-16-incomeBy way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Financial Confidence Improves, If You Hold Property

The latest edition of the Digital Finance Analytics Household Finance Confidence Index (FCI) to end September 2016 is released today. Using data from our household surveys we examine how households regard their overall financial position. The composite index rose from 95.8 in August to 97.2 in September, the highest reading for a couple of years, though still just below its 100 neutral setting. It is dragged down by households excluded from the property market.

fci-sept-2016This average national score masks some important differences. First, the score varies by state. Households in NSW and VIC are now above the neutral setting, thanks to improving job prospects, rising home prices, and lower interest rates on mortgages. With stock markets on the rise, the only negative indicator in these states is low returns on bank savings (which is encouraging more to look at investment property) and high debt. Costs of living, though rising, seem largely manageable.

There is a different story in WA and SA, where unemployment is a higher risk, property prices are muted, and debt remains high. QLD sits between the two extremes, with households in and around Brisbane mirroring the results in NSW, whilst regional QLD is mirroring WA; a state divided. In these states, costs of living are more of a concern.

fci-sept-2016-statesLooking at the results by property owning segmentation, owner occupied home owners are the most positive about their financial position, thanks to the increasing wealth effect of rising home prices, in an ultra-low interest rate environment. Property investors are increasingly confident, thanks to better than expected capital values, lower interest rates and no disruption to capital gains or negative gearing policy. The only shadow on their horizon is flat rental incomes and poor tenant behaviour.

However, one quarter of households are property inactive – mainly in rental accommodation, or living with friends or family. They are excluded from the wealth effect of property. With incomes static, the costs of rent, alongside other costs of living, kept their scores much lower (and indeed take the national average below its neutral setting). Take property inactive households out of the equation, and the remaining groups would be well above the neutral setting. Your property owning status determines your wealth footprint – no wonder people aspire to get on the property ladder, at almost any cost!

fci-sept-2016-pty Finally, we look at one of the specific dimensions in the survey. This month we look at debt exposure. Two thirds of borrowing households are as comfortable with the debts they hold as a year ago (bigger debts, but lower interest rates). Around 7% are more comfortable than a year ago, and 24% less comfortable, driven by finding it more difficult to service their debts in a low income growth, high cost growth environment. Remember, interest rates are very low at the moment, so this level of debt pressure remains a concern. If rates were to rise, pressure on these households would rise, fast.

fci-sept-2016-debtBy way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.

Household Financial Security Confidence Improves Again

The latest edition of the Digital Finance Household Finance Confidence Index, to end August is released today. Overall the index rose again, from 95.1 to 95.8.

Household costs were relatively contained, whilst many received a boost from the RBA cash rate cut. Some savers were able to take advantage of higher term deposit rates, although others saw their returns on cash deposits falling further. Income growth remained static, but net worth improved thanks to rises in the value of property and shares. Overall the index remains below a neutral setting, but some households in some states are now well into positive territory.

fci-aug-2016 The cash rate cut helped to propel the confidence of those with owner occupied and investment property, while those who are property inactive did not show the same rise. In addition, the more recent positive home price rises bolstered property investors.

fci-aug-2016-ptyThe state variations continue to widen, with households in NSW and VIC well into positive territory, whilst those in WA languish.

fci-aug-2016-statesBy way of background, these results are derived from our household surveys, averaged across Australia. We have 26,000 households in our sample at any one time. We include detailed questions covering various aspects of a household’s financial footprint. The index measures how households are feeling about their financial health. To calculate the index we ask questions which cover a number of different dimensions. We start by asking households how confident they are feeling about their job security, whether their real income has risen or fallen in the past year, their view on their costs of living over the same period, whether they have increased their loans and other outstanding debts including credit cards and whether they are saving more than last year. Finally we ask about their overall change in net worth over the past 12 months – by net worth we mean net assets less outstanding debts.