Fixed rate demand hits three year high

Fixed rate demand has risen to its highest level in more than three years, according to new data.

August 03, 2017

Fixed rate demand has risen to its highest level in more than three years, according to new data.

The latest national home loan approval data from Mortgage Choice found fixed rate home loans accounted for 29.63% of all loans written throughout the month of July.

“This is the highest level of demand we have seen for fixed rate home loans since December 2013, when fixed rate home loans accounted for 33.06% of all loans written,” Mortgage Choice chief executive officer John Flavell said.

“The surge in popularity in this type of product does not come as much of a surprise when we look at what's been taking place in the market in recent weeks.

“A few of Australia's lenders have lowered the interest rates charged on some of their fixed rate products, with some trimming up to 10 basis points from their four and five year rates. As a result, many of the fixed rate home loans now on offer are very competitively priced.

“Of course, this isn't the only activity taking place in the market. In recent weeks, many of Australia's lenders have introduced a raft of other policy and pricing changes.

“Some lenders have significantly increased their interest only pricing across both their investment and owner-occupied products. These changes have helped make the mortgage market more complex than ever before.

“Subsequently, borrowers wanting certainty and security over their repayments for a set period of time are increasingly turning to a fixed rate mortgage.”

Fixed rate demand rose in every state throughout the month of July.

Western Australia had the highest proportion of borrowers opting for a fixed loan, with the product making up 35.77% of loans written throughout July.

Not far behind was New South Wales, where fixed rate loans accounted for 33.59% of all loans written, and Queensland, where fixed rate loans accounted for 28.08% of all loans written.

Overall, variable rate loans remained the most popular product for borrowers in Australia, particularly ongoing discount loans.

According to the data, this type of home loan product accounted for 40.71% of all mortgages written.

Looking ahead, Mr Flavell said it remained to be seen whether borrowers continued to flock towards the perceived safety of fixed rate home loans, or ride the changes in the market by selecting a variable rate product.

“Borrower demand for certain products will be dictated by what happens in the market,” he said.

“For example, if we continue see added complexity in the market - with lenders making changes to their pricing and policy - I would expect to see more borrowers opting for the security of a fixed rate loan.”

Regardless of what happens in the immediate future, Mr Flavell said borrowers and prospective buyers needed to remember that home loan rates are still hovering around historically low levels.

“Whether you're looking to buy your first property, upgrade, refinance or even renovate, now it a great time to make your property goals a reality.”

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