Fixed rate demand falls

Demand for fixed rate home loans has dipped, with this type of product accounting for just over 20% of all loans written throughout March.


April 03, 2017

Demand for fixed rate home loans has dipped, with this type of product accounting for just over 20% of all loans written throughout March.

According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for 20.89% of all loans written in March, down from 22.22% in February.

Mortgage Choice chief executive officer John Flavell said he was “somewhat surprised” to see a fall in fixed rate home loan demand given that many of Australia's lenders have recently raised their rates.

“Over the past few weeks, many of Australia's lenders have increased their variable home loan interest rates,” he said.

“While some lenders increased their variable rates by as little as 3 basis points, others were quick to increase their variable rates by over 20 basis points across some of their products.

“Given that home loan interest rates are rising, I am somewhat surprised to see a fall in fixed rate demand.”

Looking ahead, Mr Flavell said fixed rate demand could potentially increase as more borrowers look to lock in a fixed rate and therefore beat any future rate hikes.

“There is no doubt that interest rates will continue to rise over the short to medium term. As and when this happens, I think we will see more borrowers looking for interest rate stability and security,” he said.

Across the country, fixed rate demand was highest in Queensland, with this type of product accounting for 24.74% of all home loans written throughout the month of March.

New South Wales wasn't far behind, with fixed rate demand accounting for 23.13% of all loans written within the state.

Overall however, variable rate home loans – specifically ongoing discount mortgages – remained the most popular product amongst borrowers.

Within Australia, ongoing discount home loans accounted for 40.84% of all mortgages written.

Regardless of what happens with interest rates over the coming months, Mr Flavell said it was important for borrowers to remember that home loan rates were still low by long-term standards.

“Even if Australia's lenders do look to increases their home loan rates again in the near future, they will still be low and the cost of borrowing will remain incredibly affordable,” he said.

“Now is still a great time for borrowers to buy, refinance, upgrade and even renovate.”

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