Fixed rates have dropped to a quarter of the levels they were nine months ago, new data from Australian Bureau of Statistics show.
That fixed rates have dropped from 20.6% of all loans settled in April 2013, to 15.3% in January 2014 has come as a surprise to many in the mortgage industry, as common opinion put them to rise.
Homeloans sales general manager Greg Mitchell told Australian Broker that with variable rates remaining low for a sustained period, the attractiveness of fixed rates diminished during the latter part of 2013.
“Despite further fixed rate cuts in recent months, which have taken many by surprise, we expect to see variable rates continuing to dominate as the first choice for borrowers in the foreseeable future.”
Fixed rates peaked last April at 26.8% and have dropped slowly to 15.3%.
As a result, there has been a spike in borrowers fixing their home loan, with almost 2,000 more fixed loans financed in January 2014 – 6,717 – compared to 4,787 the January before, according to research by Finder.com.au.
Finder spokeswoman Michelle Hutchison believes fixed rates will fall further.
“The average three-year fixed rate has fallen by 0.07 percentage points this year to 5.11% and you can find one-year fixed rates for as low as 3.99% by IMB
– that’s the lowest I’ve ever seen a fixed rate home loan,” she said.
The ABS data also shows one in three (31%) of home loans settled in January were refinances, with 13,737 loans refinanced.