Fixed rate home loans are gaining traction in the low-rate environment, with the demand for fixed home loans now accounting for almost one in four mortgages written.
Fixed rates made up 24.19% of all home loans written in August, up from 23.82% recorded the month before, Mortgage Choice’s latest Homeloan Choices data revealed.
The ‘mortgage wars’ which started in July saw many lenders slash the interest on their fixed-rate products, most notably the five year home loans. Mortgage Choice spokesperson Jessica Darnbrough said it is normal to see demand catch up a few months later.
“As such, it wasn’t surprising to see fixed rates starting to gain greater traction with borrowers in August. Moving forward, we expect fixed rate demand to climb slightly higher again throughout September, as more borrowers look to take advantage of the historically low fixed rates that Australia’s lenders are currently offering,” she said.
Antony Cahill, group executive products and markets at NAB
said the lender has cut fixed rates five times in 2014, and that fixed rate applications accounted for almost 20% of total applications in August as consumers reap the benefits of low interest rates.
“What we are now seeing is customers opting for our five-year term in greater numbers than we’ve seen before," he said.
According to the Mortgage Choice data, fixed rates were most popular in Queensland (29.85%), with South Australia (25.83%) and New South Wales (25.30%) not far behind. The lowest demand for fixed rates was seen in Victoria (16.70%).
However, despite lenders cutting rates on their suite of fixed home loan products, the majority of Aussie
s still prefer to take the gamble and opt for variable rates. But regardless of which home loan product consumers want, Darnbrough said all borrowers would have secured an incredibly competitive product.
“Not only are rates low, but Australia’s lenders have proven they are hungry for business and they are willing to cut the interest on their suite of products, offer significant discounts or other incentives in order to win business,” she said.