January 12, 2015
Fixed rates loans are dropping in popularity due to Cash rate instability – are we ready for change?
After much hype about ‘fixing rates’ for what seems like a long time thanks to the RBA keening rates steady for well over a year, demand for fixed rate home loans has hit its lowest level in 22 months, new data has revealed.
According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for just 22.29% of all loans written in December – down significantly from the 26.98% recorded the month before.
Daniel Meade, your Local Mortgage Choice broker in Brisbane, said that with speculation mounting that the Reserve Bank of Australia could potentially cut the cash rate again in the coming months, it is not surprising to see an increasing number of borrowers opting for a variable rate home loan.
At the beginning of December last year, speculation was rife that the Reserve Bank of Australia could cut the cash rate throughout 2015.
Ongoing weakness in the Australian and global economy has encouraged some analysts to change their cash rate forecasts to include up to two further rate cuts.
While future cash rate cuts are purely speculation at the moment, it would seem the chatter has been enough to encourage more home buyers to take out a variable rate mortgage.
If rates were cut again, borrowers with a variable rate mortgage may benefit.
Across the country, variable rate home loans were most popular in Victoria, with this type of product accounting for 85.79% of all home loans written last month. South Australia and Western Australia were not far behind, with variable rate products accounting for 82.81% and 82.11% respectively.
Variable rate products were least popular in New South Wales, with this type of mortgage accounting for 70.61% of all loans written. By comparison, fixed rates remained very popular in the state, accounting for almost 30% of all loans written.
Looking ahead, regardless of whether borrowers opt for a fixed rate mortgage or a variable rate home loan, they will definitely be able to secure a competitive rate.
Australia’s lenders are offering some very sharply priced products at the moment, so regardless of what type of home loan product you eventually decide upon, now is a good time to be a home buyer.
For more information, please contact Daniel Meade on 07 3833 9666, or email at firstname.lastname@example.org
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.