house prices — Consumers expect higher house prices and mortgage rates, according to a recent European Central Bank (ECB) survey. The findings indicate a shift in consumer perceptions regarding inflation, income growth, and overall economic conditions.
House prices: Inflation Perceptions on the Rise
The ECB reported that median perceived inflation over the past year has increased to 3.2 per cent, up from 3.1 per cent in November. While expectations for inflation over the next 12 months remained stable at 2.8 per cent, three-year expectations rose slightly to 2.6 per cent from 2.5 per cent.
Consumer Confidence and Spending Trends
In terms of spending, consumers perceived nominal growth over the past year to be 4.9 per cent, a slight decline from 5.0 per cent in November. Interestingly, expected spending growth for the upcoming year held steady at 3.4 per cent. This stability reflects differing expectations among income groups, with lower-income households showing reduced spending optimism.
Home Prices and Mortgage Rate Expectations
Expectations for home price growth in the next year have increased to 3.6 per cent, compared to 3.4 per cent the previous month. Notably, there is a divergence in expectations based on income levels, with lower-income respondents anticipating a 4.1 per cent rise in home prices, while higher-income respondents expect a 3.5 per cent increase.
In tandem with home price expectations, consumers foresee mortgage interest rates rising slightly to 4.7 per cent, up from 4.6 per cent. The disparity in mortgage rate expectations between income brackets has widened, with lower-income households anticipating an average of 5.5 per cent, compared to 4.1 per cent for higher-income households.
Shifting Economic Outlook
The survey also highlighted a slight improvement in economic growth expectations for the next year, shifting from minus 1.3 per cent in November to minus 1.1 per cent. However, expected unemployment rates have increased slightly to 11.0 per cent, with lower-income households predicting the highest rates at 13.2 per cent.
Despite these mixed signals, the ECB notes that overall inflation perceptions and expectations remain broadly aligned across different income groups. Younger respondents, aged 18 to 34, continue to report lower inflation expectations compared to older age groups.
Consumer Insights on Credit Conditions
Regarding access to credit, the net percentage of households reporting tighter conditions over the past year has decreased, yet expectations for credit availability in the coming year have remained unchanged since October. This reflects a cautious but stabilising outlook from consumers.
