Borrowers fixing rates in time for Christmas

December 03, 2012
David Wilson

Fixed rate home loans continue to lure more new borrowers despite the possibility of variable rate cuts this month. New data from Mortgage Choice, the country’s largest independently-operated mortgage broker, shows fixed rate loan demand rose marginally in November to 22.37% from 21.72% in October.  

Uptake for fixed rate loans increased for the fourth consecutive month in the majority of states, by an average of 3.39 percentage points, but dropped in QLD by 6.76 percentage points.  

Mortgage Choice Greensborough franchise owner, Hannah Fox said, “Our data shows that more than one in every five new borrowers is not phased by the possibility of further variable rate cuts as early as this week, having locked in to a fixed rate loan with repayment certainty for the next year or more.”  

“With fixed rates at their lowest level since 2009, there are bargains on offer to both new and existing borrowers. Lenders continue to tweak their fixed rate loan pricing based on their desire for business while factoring in their funding costs and the level of demand from borrowers.  

“When investigating the option to fix part or all of your home loan’s interest rate, be sure to weigh up your options carefully as fixed rate loans have both pros and cons. Remember, the interest rate is not the only factor to consider, also compare any initial, recurring and break costs, the ability to make extra repayments and redraw, lender service and how long the loan will take to be approved.”   While many fixed rate loans are currently priced lower than variable rates, the majority of borrowers are choosing the latter.  

“Despite a marginal dip in demand in November by 0.65 percentage points to 77.63%, variable interest rate loans remain the top choice for Australian mortgage holders. Ongoing discount rate loans - where the rate is negotiated to a reduced amount over the loan term usually in return for an annual fee - remained the loan of choice, accounting for 41% of all new home loan approvals,” said Hannah.

 “Borrowers who are leaning towards variable rates and who have their heart set of further rate cuts will be holding their breathe this week to see if the Reserve Bank of Australia heeds warning signs from the retail, manufacturing and housing markets and cuts rates in time for the Christmas.”  

Standard variable rate loan demand rose by 1.41 percentage points to 16.90% of all new loan approvals, while the preference for basic variable rates dropped by 2.82 percentage points to 15.96%. At the same time, line of credit and introductory rate loan appeal remained relatively steady at 2.91% and 1.29%, respectively. 

Posted in: Home loans

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