Interest rates hike causes slight dip in consumer confidence

Consumer confidence in Australia has declined only slightly despite the recent interest rate rises.

The Westpac-Melbourne Institute index of consumer sentiment recorded a 3.8 per cent fall in December from November. This follows three consecutive interest rate increases by the Reserve Bank of Australia that has seen the central bank raise its cash rate target to 3.75 per cent from three per cent between October and December, the Australian reports.

Confidence has been damaged further by the decision of various major banks to raise interest rates by more than the RBA increase. The standard variable mortgage rate has now risen to between 6.5 per cent and 6.75 per cent, compared with around 5.75 per cent in September, the news provider said.

"A closer inspection of the components of the index shows that those folks holding a mortgage have responded much more negatively to the rate increases than those who are not holding a mortgage," said Westpac chief economist Bill Evans.

The findings will encourage homeowners to compare home loans as the index revealed that confidence among mortgage holders fell by 8.9 per cent.

This week, Westpac chief executive Gail Kelly advised that higher borrowing costs were now the norm.

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