Fixed rate demand bounces back from four-year low

by Julia Corderoy04 Dec 2015
Fixed rate demand has bounced back from a four-year low in November, as borrowers are cautious of further rate rises.

According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for 17.39% of all loans written throughout the month of November. This is up from a four-year low of 13.88% recorded October. 

Mortgage Choice chief executive, John Flavell, said the bounce back in fixed rate demand wasn’t surprising given many lenders announced out-of-cycle rate hikes over the past month. 

“At the end of October, the majority of Australia’s lenders lifted the interest rates on their suite of variable home loan rate products. The interest rate increases were made outside of any movements by the Reserve Bank of Australia, which sent shockwaves through existing and potential property buyers.

“As a result of those rate hikes, an increasing number of new buyers are looking to fix at least part of their mortgage as they seek out security and surety around their mortgage repayments.”

Across the country, demand for fixed rate home loans was strongest in NSW, with this type of product accounting for 24.59% of all loans written. 

This was followed by Western Australia and Queensland, with fixed rate demand accounting for 16.81% and 15.83%, respectively. At the other end of the spectrum, demand for fixed rate products was lowest in Victoria and South Australia, with this product accounting for 8.89% and 12.37% of all loans written. 
However, ongoing discount variable rate products are still the most popular for mortgage holders, with this type of product accounting for 51.78% of all loans written throughout the month of November.

But Flavell says he expects fixed rate demand to continue to climb.

“Looking ahead, I would expect to see greater demand for fixed rate home loan products.

“Australia’s lenders made it clear in October when they raised their rates that additional rate hikes could be on the cards. In order to avoid any future rate hikes and obtain some surety around their mortgage repayments, I believe we will see more Australians locking into a fixed rate home loan.”