Consumer confidence to fall by Christmas

Households suffering mortgage stress could well spend less this Christmas. And it is not just the battlers that will pull back. Young families in middle income areas are also starting to struggle, according to management consultant Fijitsu Consulting head Martin North.

A report just released by Fujitsu and JP Morgan has predicted that the number of households in severe mortgage stress will almost double by next June from 70,000 to 113,000.

And at the same time, the credit crunch will lead to borrowers in mild stress, which is households forced to curtail spending habits, leaping from 170,000 to 487,000.

Many of those in mild stress and who will cut back on spending are from nice suburbs.

North says the following areas are typical of suburbs where confidence is falling. They include Eaglevale in NSW, Mount Evelyn in Victoria, Park Ridge in Queensland, Byford in WA and Greenwitch in SA.

“People have maxed out on their credit cards and it will hit about Christmas time. They won’t splurge like they have been doing,” North says.

He also expects the RBA to raise interest rates 25 points in November and the banks to re-price loans, which could lead to a further fall in consumer confidence.

However he says that consumer confidence is certainly not falling across the board. “Some segments are having a field day,” he says. They include the young affluents and baby boomers. “These people are still buying investment property and spending.”