April 01, 2015
New data shows fixed rates continue to fall out of favour with borrowers, with demand for this type of product tumbling for the fourth consecutive month.
According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans made up just 18.00% of all loans written throughout March – a two year low.
Mortgage Choice spokesperson Jessica Darnbrough said over the last 12 months, fixed rate demand has dropped from all-time highs to near record lows.
“Since December 2013, fixed rate demand has dropped approximately 15%, falling from the historical high of 33.06%,” Ms Darnbrough said.
“Of course, with a majority of economists now predicting that the Reserve Bank of Australia will cut the cash rate again at either the April or May Board meeting, it is not surprising to see a larger number of borrowers opting for variable rate products.
“History has shown us that when the cash rate drops, many of Australia's lenders follow suit, trimming the interest on their suite of variable rate products. And, looking at our latest Home Loan Choices data it is clear that borrowers are not wanting to lock themselves into a fixed rate home loan in order to take advantage of any future rate cuts.”
Across the country, fixed rate demand was lowest in Victoria, where this type of product accounted for just 13.41% of all loans written last month.
South Australia and West Australia were not far behind, with demand for fixed rate products hitting 16.87% and 18.58% respectively. Demand for fixed rate home loans was highest in New South Wales and Queensland, with this type of product accounting for 19.27% and 19.62% respectively.
On the flipside, variable rate demand was strong across the country, with ongoing discount products once again proving to be the most popular variable rate product on offer, accounting for 43.62% of all loans written.
Moving forward, Ms Darnbrough said she didn't expect demand for fixed rate home loans to pick up anytime soon.
“With the Reserve Bank of Australia actively indicating that it plans to cut rates again in the future, I wouldn't be surprised to see an increasing number of borrowers flocking towards variable rate home loans,” she said.
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