Fixed rate loans make a come back

Borrower preference shifted in September, reveals data from Mortgage Choice.

October 09, 2018

Borrower preference shifted in September, reveals data from Mortgage Choice.

According to the Company’s latest national home loan approval data, demand for fixed rate home loans surged over the month, accounting for almost 24% of all loans written throughout September 2018 – an increase of over 6% on the month prior and the highest level since December 2017.

Across the country, borrowers in Queensland were the most likely to choose a fixed rate mortgage, with 26.47% of borrowers choosing this type of home loan product.

This was followed by New South Wales where 26.24% of borrowers chose to fix.

Victoria has seen the lowest level of fixed rate demand for eight consecutive months, however demand for this type of product rose to almost 17% in September – an increase of almost 4% on the month prior, signalling that a reversal to a long-term trend could be on the horizon.

Chief Executive Officer of Mortgage Choice, Susan Mitchell, said the shift in borrower demand was largely anticipated given the recent changes in the lending landscape.

“September’s data is unsurprising when you consider the recent rate hikes to variable rate home loan products announced by three of the four major banks. This would no doubt be encouraging more borrowers to fix,” said Ms Mitchell.

“History has shown that when the majors lift their rates, smaller lenders are quick to offer competitive pricing on their own products in order to attract borrowers in search of a better deal. However, we have seen limited market movement due to a combination of factors such as the regulatory environment and increasing wholesale funding costs which would no doubt be affecting smaller lenders.

“Institutions across the country have become more selective about the customers they lend to, vying for borrowers in a healthy financial position. Indeed, lenders are seeking high-quality borrowers who present low risk.

“This highlights the need for borrowers to review their current home loan and financial situation with the help of a qualified mortgage professional and financial adviser to ensure they are best placed to secure a competitive deal when they choose to switch loan providers.”

Ms Mitchell said, when home loan interest rates are on the rise, borrowers may want to consider fixing part or all of their home loan, safeguarding against further rate rises and allowing for repayment certainty each month.

“Due to the current tightened lending criteria and lender’s reduced appetite for lending, I would encourage anyone looking to secure a home loan to speak to their local Mortgage Choice broker who can help them navigate the complex lending environment and find a loan to suit their unique financial needs,” Ms Mitchell concluded.

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