Fixed rate home loans at 10 year popularity high

by AB03 Apr 2013

Nearly one in three new borrowers locked in fixed rates on their loans during March, according to AFG, who recorded the highest proportion of fixed rate loans the aggregator has seen since it began documenting 10 years ago.

The AFG Mortgage Index, published yesterday, shows that 29.6% of all new home loans were fixed – a leap from 24.1% in February and 16.3% in January.

The company recorded its best sales month ever for March, processing $3,181 million worth of home loans, 8.6% higher than in March 2012 and beating its previous record month of March, 2009, when it processed $3,153 million.

Growth was largely driven by first home buyers in WA and investors in NSW, according to general manager of sales and operations, Mark Hewitt.

“We have seen an unprecedented surge of borrowers wanting to lock in rates. With many commentators believing the interest rate cycle is at the bottom, borrowers have responded by fixing rates of less than 5% that have been widely on offer. These rates are very low by historic standards and it makes sense to lock them in while they are still available.”

The index shows the continuing weakness of first home buying activity in NSW, where only 4% of new borrowers are first home buyers and QLD (5.1%). These figures compare with 15.3% for SA, 18.3% for VIC and 22.9% in WA.

LVRs were 68.8% in March, consistent with the average over the past year. These figures were highest in states with the greatest first home buying activity (WA and VIC – both 70%) and lowest in NSW (66.8%), where investors typically leverage equity in existing properties when setting up new loans.