Fixed rate demand drops fourth month in a row

Demand for fixed rate home loans has fallen for the fourth month in a row, according to new data.

January 09, 2018

The latest national home loan approval data from Mortgage Choice found fixed rate home loans accounted for 22.81% of all loans written throughout December.

“We have seen a slight drop in the proportion of borrowers opting for a fixed rate mortgage over the past few months. In August 2017, approximately 31% of all borrowers selected a fixed rate mortgage. Since that time, fixed rate demand has fallen 8.24% to where it is today,” Mortgage Choice chief executive officer John Flavell said.

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

“And, with all signs suggesting that that cash rate could remain lower for longer, the desire for borrowers to lock into a fixed rate mortgage is weakening.”

While fixed rate demand has taken a hit in recent months, Mr Flavell said it was important for borrowers to note that fixed rate loans were still good products.

“At the end of the day, the type of home loan a customer chooses will all come down to their unique personal situation and what they feel comfortable with. While we are seeing fewer borrowers locking into fixed rate mortgages, many 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.

With interest rates continuing to hover around record lows, Mr Flavell said regardless of whether customers select a fixed or variable rate home loan, they can be assured of securing a sharp rate.

Across the country, Western Australia boasted the highest level of fixed rate demand, with this type of product accounting for 31.42% of all loans written throughout the month of December, up from 17.59% the month before.

South Australia wasn’t far behind, with fixed rate products accounting for 27.33% of all loans written within the state throughout December.

Fixed rate demand was the lowest in Victoria where it accounted for 15.4% of all home loans written.

Variable interest rate mortgages were the most popular products, making up 77.19% of all loans written.

Mr Flavell said he would not be surprised if there continued to be a slight decline in fixed rate demand.

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

He said the new year provided a great opportunity for borrowers to review their home loan.

“The start of the calendar year 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 have the best mortgage with the most competitive interest rate."​

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