1 in 4 borrowers are locking into a fixed rate mortgage

Ongoing rate movements in the mortgage market has helped demand for fixed rate home loans to hover at record highs, new data has revealed.


November 01, 2017

Ongoing rate movements in the mortgage market has helped demand for fixed rate home loans to hover at record highs, new data has revealed.

The latest national home loan approval data from Mortgage Choice found fixed rate home loans accounted for 28.23% of all mortgages written throughout October.

“We have seen very little change in demand for fixed rate home loans over the last couple of months. In September, fixed rate loans accounted for 28.33% of all home loans written – which was largely the same as what we saw this month,” Mortgage Choice chief executive officer John Flavell said.

“Over the past four months, fixed rate demand has consistently sat above 28%. The last time we saw this level of consistent fixed rate demand was back in early 2013.

Mr Flavell said this prolonged period of heightened demand for fixed rate products was largely expected at this time.

“Over the last few months, it has become increasingly clear that the cash rate could rise in the not too distant future,” he said.

“Indeed, market conversations around home loan interest rates have changed from ‘if rates rise', to ‘when rates rise'.

“Borrowers are acutely aware that a rise in the official cash rate is now largely inevitable and, subsequently, are increasingly opting for certainty and security around their mortgage repayments.”

In addition to increasing speculation about future interest rate hikes, Mr Flavell said pricing competition between Australia's lenders has started to heat up in the fixed rate space, which is ultimately encouraging more borrowers to look at this type of product.

“We continue to see Australia's lenders adjust the interest rates on their fixed rate products for both investors and owner-occupiers,” he said.

“Some have slashed the interest rates on their fixed rate products by as much as 20 basis points in recent weeks. This would no doubt influence some borrowers' home loan product decisions.”

Across the country, New South Wales had the highest level of fixed rate demand, with this type of product accounting for 32.32% of all loans written throughout September, up from 28.07% the month before.

This was followed by Queensland, where fixed rate loans accounted for 31.70% of all loans written, and Western Australia, where fixed rate loans accounted for 26.37% of all loans written.

Overall, variable rates continue to be the most popular home loan product across Australia, with 71.77% of borrowers opting for this type of mortgage.

Mr Flavell said with various lenders competing for business and offering sharp rates on their home loan products, both fixed and variable, now was a good time to take out a new loan or refinance.

“New and existing borrowers have no shortage of choice when it comes to selecting a home loan. That said, borrowers should speak to a mortgage broker who can advise on the best product for their needs,” he said.


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