Fixed rate home loan demand fell significantly last month, new research has revealed. According to the latest national home loan approval data, fixed rate home loans accounted for just 14.41% of all loans written throughout the month of September – down from 17.41% the month prior.
Demand for fixed rate home loans hasn’t been this low for more than four years. The last time fixed rate demand was this low was back in August 2011, when this type of home loan accounted for 13.78% of all home loans written.
It seems borrowers are increasingly opting for variable rate home loans as they believe rates are unlikely to rise for some time yet. And, if the minutes of the Reserve Bank of Australia’s September Board meeting are anything to go by, the official cash rate could be left on hold for the foreseeable future.
In the September Board meeting, the Reserve Bank said inflation was forecast to remain consistent with the target over the next one to two years. If this proves to be the case, we could see rates left on hold for some time yet.
Across the country, demand for fixed rate home loans was weakest in Victoria, where this type of product accounted for just 8.61% of all loans written. Western Australia was not far behind, with fixed rate home loans accounting for 12.35% of all loans written. At the other end of the spectrum, fixed rate demand was strongest in New South Wales, with this type of product accounting for 16.65% of all loans written.
Of the variable rate loans on offer, ongoing discount products once again proved the most popular with borrowers, with this type of product making up 50.51% of all loans written in September.
While the property market is showing signs of volatility at the moment, one thing is constant – low rates. While rates are low and there is little talk of future rate hikes, borrowers will continue to opt for variable rate products.
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