Rate fears cause borrowing slowdown

A growing number of Aussies are reluctant to borrow money for ‘life improving’ purchases because of fears about rising interest rates.

Research by the Australian found that spending on home renovation has been falling. A total of $465 million was borrowed for that purpose in November, amounting to a decline of 13.9 per cent since March last year.

In addition, spending on new blocks of land fell by 12.7 per cent since a peak in June.

Commonwealth Bank economist James McIntyre told the newspaper that while there seems to have been increased borrowing on credit cards and margin lending, people are not confident enough to splash out on holidays, new cars or extending the house.

The findings suggest that as their spending power falls, Aussies may be willing to compare savings accounts in search of the best options.

Matthew Bell, an economist at Australian Property Monitors, told the Australian this week that rents on homes across the country would also rise this year, partly as a result of an end to the first-home buyers’ grant.

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