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Fixed rate demand falls further

Fixed rate home loan demand has fallen to its lowest level in more than two years, new research has revealed.

May 04, 2015

Fixed rate home loan demand has fallen to its lowest level in more than two years, new research has revealed.

According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans made up just 17.91% of all loans written in April - down from 18.00% the month prior.

Speaking about the data, Mortgage Choice chief executive officer John Flavell said fixed rate demand hasn't been this low since February 2013.

“Variable home loan rates, specifically ongoing discount mortgages, continue to be the most popular product amongst borrowers, accounting for 43.96% of all loans written,” he said.

“Fixed rate demand has taken a significant hit in recent months. Just one year ago, fixed rate demand was sitting at record highs and now it is hovering near record lows.

“This sudden drop in fixed rate demand appears to be caused by the fact that an increasing number of borrowers believe home loan interest rates may fall further over the coming months. This is understandable given that the Reserve Bank of Australia continues to indicate that further easing of monetary policy may be appropriate.”

In the minutes of the April Board meeting, Governor Glenn Stevens said further easing of monetary policy may be necessary to foster sustainable growth in demand and inflation consistent with the target.

But while the RBA certainly hasn't shied away from stating that further cash rate reductions may be necessary in the future, Mr Flavell said the Board probably doesn't have the drivers to warrant another rate cut in May.

“The latest data from the Australian Bureau of Statistics found unemployment fell slightly in April, while underlying inflation rose 0.6% over the March quarter for an annual rate of 2.35% - perfectly within the Reserve Bank's target band range,” he said.

“These two factors combined would suggest the drivers aren't there to encourage the Reserve Bank to cut rates again, though future rate cuts cannot be ruled out.”

For archived copies of the Homeloan Choices bulletin, please refer to /about-us/homeloan-choices-newsletter.


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