CommBank data shows borrowers with home loans cutting back as sustained rate pressure begins to bite
Households carrying a mortgage are beginning to rein in spending as the sustained burden of higher borrowing costs takes effect, according to the latest CommBank Household Spending Insights (HSI) Index.
Those with a mortgage, which had outpaced other household types in spending growth over the past year, are now showing early signs of pullback — a shift CommBank attributes to the cumulative pressure of elevated interest rate costs.
Renters have moved into the lead, recording the fastest annual spending growth of any household group in May, with outlays concentrated in discretionary categories such as hospitality.
At the aggregate level, household spending edged higher in May after dipping in April, with seven of the 12 tracked categories recording gains. Recreation and hospitality led the recovery, supported by a partial rebound in travel demand and attendance at major events including the State of Origin football series.
"Household spending is continuing to grow, despite a more uneven pattern in recent months," said Belinda Allen (pictured right), head of Australian economics at Commonwealth Bank.
"While higher interest rates and inflation are weighing on households, consumers were willing to spend on experiences like travel, dining and events during the month of May."
Not all categories strengthened. Utilities recorded the steepest decline, falling 3.9%, driven by seasonal volatility. Education and transport spending also eased, partly reflecting bill payment timing and lower petrol prices.
CommBank expects spending growth to slow further in the second half of 2026 as higher borrowing costs and ongoing inflation continue to pressure household budgets.
"The RBA held the cash rate steady in June but remains willing to hike again if inflation proves more persistent than expected," Allen said. "The RBA acknowledged that consumer spending was slowing. We continue to expect the RBA to remain on hold for the remainder of 2026 and expect two rate cuts in 2027 based on our economic outlook."
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