Fixed rate demand continues to fall

Demand for fixed rate home loans has fallen for the fifth month in a row, new data has revealed.

February 01, 2018

Demand for fixed rate home loans has fallen for the fifth month in a row, new data has revealed.

The latest national home loan approval data from Mortgage Choice found fixed rate home loans accounted for 22.07% of all loans written throughout January.

“We started to see demand for fixed rate home loans drop off in September 2017, and it would appear that trend has continued right into the New Year,” Mortgage Choice chief executive officer John Flavell said.

“Of course, this drop in fixed rate demand is not surprising when you consider that the Reserve Bank of Australia has kept the official cash rate on hold for 17 months.

“And, with all signs suggesting that that cash rate is likely to remain lower for longer, borrowers are feeling increasingly comfortable opting for a sharply priced variable rate home loan.

“In fact, a total of 77.93% of borrowers opted for a variable home loan product in January.

“At the end of the day, the type of home loan a customer chooses will all come down to their unique financial situation. While we are seeing fewer borrowers locking into fixed rate mortgages, it’s important to note that some lenders are still offering very sharp rates in this area. If borrowers feel more secure in a fixed rate product, they should consider travelling down this path,” he said.

Across the nation, Queensland boasted the highest level of fixed rate demand, with this type of product accounting for 26.33% of all loans written throughout the month of January, up from 19.91% in December.

New South Wales wasn’t far behind, with fixed rate products accounting for 24.88% of all loans written within the state throughout December.

Fixed rate demand was the lowest in Victoria, for the second month in a row, where it accounted for 14.35% of all home loans written.

Looking ahead, Mr Flavell said he would not be surprised to see a continued decline in fixed rate demand.

“We may continue to see more people choose a variable rate home loan, particularly if the Reserve Bank of Australia continues to leave the official cash rate on hold,” he said.

“Borrowers are happy and content to ride the variable rate wave at the moment. Of course, that could all change in an instant if the Reserve Bank of Australia was to start lifting the cash rate.”

Mr Flavell said regardless of what type of product a borrower has, now is a great time for them to review their home loan.

“While the cash rate has been left on hold for an extended period of time, the market is constantly changing and interest rates are always moving. As such, now is a good time to make sure that you have the best home loan for your needs.

Speak to your local broker who can assess your current home loan product and ensure you are in the right mortgage solution with the most competitive interest rate for your unique situation.”

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