Threat of higher rates encourages borrowers to fix

Demand for fixed rate home loans enjoyed a slight boost last month, new data has revealed.

August 03, 2015

Demand for fixed rate home loans enjoyed a slight boost last month, new data has revealed.

According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for 18.46% of all loans written throughout the month of July – up from 17.58% the month prior.

“Over the month of July, many lenders announced they would raise their interest rates across some products,” Mortgage Choice chief executive officer John Flavell said.

“The price increases come as many of Australia's lenders continue to make some significant changes to their lending practices in a bid to curb investment lending growth.

“Our data would suggest the threat of rising interest rates was enough to encourage more borrowers to fix their mortgage.”

With so many of Australia's lenders making changes to their policy and pricing, Mr Flavell said the home loan environment is becoming increasingly “more complex for borrowers”.

“I wouldn't be surprised to see another slight uptick in fixed rate home loan demand next month as borrowers look for some stability and certainty around their mortgage repayments,” he said.

Across the country, fixed rate demand was highest in New South Wales, with this type of home loan accounting for 26.83% of all loans written across the state in July.

Queensland and Western Australia were next, with fixed rate home loans accounting for 16.33% and 15.35% of all loans written in those states respectively.

Demand for fixed rate products was lowest in South Australia and Victoria, with this type of mortgage product accounting for 10.68% and 11.87% respectively.

But while fixed rate demand was up across the country, variable rate home loans continued to prove most popular with borrowers. Most specifically, variable rate home loans with an ongoing discount were highly sought after, with 45.37% of all Mortgage Choice customers in July selecting this type of home loan.

“There is a lot of change happening in the home loan environment at the moment, which is highlighted by the fact that fixed rate demand varies quite substantially from month to month. With so much happening in the market, it has never been more important for potential borrowers to do their due diligence and speak with a professional to ensure they are getting the right home loan for their needs,” Mr Flavell said.

For archived copies of the Homeloan Choices bulletin, please refer to Choices Newsletter.

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