March 11, 2014
We may be seeing a change in borrower demand for fixed rates after the release of latest home loan approval figures from Mortgage Choice.
After demand for fixed rate loans peaked in December 2013 at 33.06%, demand has fallen for the second month in a row to now be at 26.08% in February.
It is clear that the current neutral rate environment is reducing borrowers’ preference for fixed rate loans.
Appearing before the House of Representatives Economics Committee last week, Reserve Bank of Australia governor Glenn Stevens, gave his strongest indication yet that the RBA board is comfortable with the current neutral interest rate environment.
Whilst the economy is strengthening with GDP growth rising to 2.8% pa in the December quarter, unemployment is expected to edge higher this year before stabilising. These opposing forces will most likely see the cash rate remain on hold for the foreseeable future.
Fixed rates were least popular in Victoria, with only 17.47% of loans approved in February being fixed. At the opposite end of the scale, Queenslanders' love affair with fixed rates shows no sign of abating with demand increasing to 33.13%.
The slowing demand for fixed rates has seen a number of lenders try to boost demand by reducing their 2 and 3 year fixed rates over past month. Suncorp and Bank of Melbourne were the latest to join the club, with Suncorp's 2 year fixed rate dropping by 0.05% and Bank of Melbourne's 3 year fixed rate falling by 0.10%.
If you would like to find out what is the right rate option for you, please call us on 9432 6070 or click on the ‘contact us’ tab at the top of this page.