The number of borrowers opting for fixed rate mortgages has increased for the fourth consecutive month, according to national home loan approval data from Mortgage Choice.
Throughout December, fixed rate home loans accounted for 22.04% of all loans written – an increase from 19.51% in November.
“With speculation mounting that the Reserve Bank of Australia (RBA
) could soon lift the official cash rate, it is clear that a growing proportion of borrowers wish to beat any potential rate hikes by opting for a fixed rate home loan,” said Mortgage Choice CEO John Flavell
Current market conditions plus a swathe of interest rate hikes by the banks means the RBA
was now more likely than ever to increase the official cash rate, Flavell said.
“Many of Australia’s lenders have already started to raise rates across their suite of home loan products. In addition, the [RBA
] has stated that the time for easing the monetary policy setting has now passed. All of these factors combined would suggest that a rate increase by the Reserve Bank could be right around the corner.”
With this in mind, more borrowers are opting for fixed rate products, he added.
December demand for fixed rate mortgages was highest in NSW, accounting for 27.34% of all loans written.
“Queensland wasn’t far behind, with fixed rate home loans accounting for 24.64% of all loans written within the state. At the other end of the spectrum, fixed rate demand was lowest in Victoria, with this type of product making up just 12.69% of all home loans written,” he said.
Looking towards the future, Flavell said he wouldn’t be surprised if the demand for fixed rate mortgages continued to increase across the country, especially as more people sought to avoid the ever increasing threat of rising interest rates.
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