Borrowers still fixing despite high likelihood of rate cuts

by Mackenzie McCarty04 Dec 2012

Fixed rate home loans continue to attract new borrowers - despite the possibility of variable rate cuts this month - according to new Mortgage Choice data.

The aggregator’s research results show fixed rate loan demand rose marginally in November to 22.37%, up 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%, but dropped in QLD by 6.76%.

Mortgage Choice spokesperson Belinda Williamson says the data shows at least one in five new borrowers is not bothered by the possibility of further variable rate cuts as early as this week, having locked into a fixed rate loan with repayment certainty for at least the next year.

“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.”

However, the data shows that 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 to 77.63%, variable interest rate loans remain the top choice for Australian mortgage holders. On-going discount rate loans…remained the loan of choice, accounting for 41% of all new home loan approvals.”

Williamson says borrowers who are leaning towards variable rates will be holding their breath this week to see if the RBA heeds warning signs from the retail, manufacturing and housing markets and cuts rates in time for Christmas.

Standard variable rate loan demand rose by 1.41% to 16.9% of all new loan approvals, while the preference for basic variable rates dropped by 2.82% 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.