Rising fixed rate loan demand reflects consumer caution

Australians’ demand for fixed rate home loans has not been this high since May 2008, according to loan approval figures from the country’s largest independently-owned mortgage broker.

January 10, 2011

Australians' demand for fixed rate home loans has not been this high since May 2008, according to loan approval figures from the country's largest independently-owned mortgage broker.

Mortgage Choice customer data for December 2010 shows the year ended with a bang for fixed interest rates as appetite for such loans increased to a 31-month high. For a third consecutive month, every state saw a lift in their uptake despite the continued rising cost of fixed rates.

Company spokesperson Kristy Sheppard said, "Australian borrowers' demand for fixed term mortgages has reached a pace unseen for over two and a half years, at 15.2% of our loan approvals in December, despite the cash rate being much lower now than back then."

"Fixed term loan approvals rose four percentage points over the month to more than double the six month average of 7.1% and more than triple the 12-month average of 4.6%.

"Much is being written about the cautious attitude of Australians and our latest data reflects that. Many mortgage holders are locking in the interest rate on part or all of their loan so they can better control their ability to meet repayments.

"It's obvious that concerns about utility bills and other living cost hikes along with predicted rate rises for 2011 are having a noticeable effect on the purchase decisions of new borrowers. Home loan commitments are no exception."

However, standard variable rate loans continue to hold relatively steady as the favoured home loan type, at 32.9% of approvals, followed by basic variable loans at 25.1% and ongoing discount loans at 21.2%.

The latter type of loan - where the interest rate is discounted over the entire loan term (most of these would be 'professional package' loans) - experienced a significant rise of 4.3 percentage points in December. This also reflects the growing conservatism of new mortgage holders.

Line of credit home loans (often popular with investors) rose to 5.4% of approvals from 3.8% while introductory rate home loans accounted for only 0.3% of all approvals in December.

Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to over $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 18+ year old mortgage broker has a loan book of over $40 billion.

For further information or to arrange an interview, please contact:

Belinda Williamson
Mortgage Choice
(02) 8907 0472 or 0407 416 124

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