With speculation rife that the next move by the Reserve Bank of Australia could be an interest rate rise, an increasing number of borrowers are opting to fix their mortgage.
Mortgage Choice’s latest home loan approval figures showed fixed rate mortgages accounted for 26.49% of all mortgages written through April – a modest lift on the 24.22% written the month before.
Demand for fixed rate mortgages increased in every state bar Queensland and South Australia. Fixed rate demand was strongest in New south Wales, with this type of product account for 33.60% of all loans written within the state throughout April.
With speculation intensifying that the Reserve Bank could be set to lift the official cash rate in the coming months, Mortgage Choice spokesperson Jessica Darnbrough said it was not surprising to see a small lift in the number of borrowers choosing to fix their mortgage.
“While variable rates continue to prove more popular with borrowers, we are starting to see fixed rate demand head back to levels not seen since last year when all of the lenders were aggressively competing on price in the fixed rate arena.”
Overall, ongoing discount rates proved the most popular with borrowers, with this type of product accounting for 43.19% of all loans written.
Across Australia, demand for ongoing discount mortgages was strongest in Western Australia, accounting for 51.89% of all loans written last month, followed closely by Queensland and New South Wales, with this type of product accounting for 45.47% and 44.61% respectively.
In terms of fixed rates, demand was weakest in Victoria, with this type of home loan accounting for just 20.08% of all loans written last month.
“Regardless of whether borrowers choose a fixed or variable rate mortgage, they will no doubt secure themselves a sharp rate. Interest rates continue to hover around record lows and lenders are still competing on price for market share. With that in mind, it is fair to say that potential borrowers who are keen to buy and have the ability to do so, now may be a good time for them to get onto the property ladder,” Darnbrough said.