Fixed rate demand falls again

Demand for fixed rate home loans has fallen for the sixth month consecutive month, new data has revealed.

March 02, 2018

Demand for fixed rate home loans has fallen for the sixth month consecutive month, new data has revealed.

The latest national home loan approval data from Mortgage Choice found fixed rate home loans accounted for 21.75% of all loans written throughout February.

“We first saw demand for fixed rate home loans fall in September 2017 when just over 28% of customers opted for a fixed rate mortgage. In February, this percentage dropped to 21.75%,” Mortgage Choice chief executive officer John Flavell said.

“A growing proportion of Australians are opting for a variable rate home loan. In fact, we saw a total of 78.25% of borrowers opting for a variable home loan product in February, up from 77.93% in January.

“Whilst the trend is not surprising, mounting speculation of at least one cash rate rise later this year may encourage borrowers to consider fixing part of their home loan in the near future,” he said.

Across the country, the proportion of customers taking out fixed home loans eased in every state except Queensland and South Australia. Fixed rate loans accounted for 28.07% of all loans written in Queensland throughout the month of February, up from 26.33% in January.

In South Australia, fixed rate products accounted for 24.19%. This was a notable increase from 16.60% the month prior but in line with the 6 month average of 24.48%.

Fixed rate demand was the lowest in Victoria, for the third consecutive month, where it accounted for 10.97% of all home loans written.

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

“We may see an increase in demand for fixed rate products in the future, particularly if the Reserve Bank of Australia raises the official cash rate,” he said.

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

“Borrowers may have experienced competitive rates for some time now, but history tells us they won’t stay that way forever. Borrowers should aim to make extra repayments while they can, creating a buffer for eventual rate rises.

“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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