Fixing still favoured as RBA cut looms

by Adam Smith27 Apr 2012

Demand for fixed rate loans continues to build despite the near-certainty of an RBA cut next week.

Data from Loan Market has shown a significant increase in demand for fixed rate loans over the past month. The company has put the rise down to banks' decisions to move independently of the RBA.

"Loan Market has seen demand for fixed rates increase by 15% in the past month in a clear sign that consumers are mindful the banks may keep raising their variable rates irrespective of RBA rate decisions," a company spokesman said.

The spokesman predicted that banks may not pass on any RBA rate cut in full, and said fixed rates on offer remained an attractive proposition to borrowers.

"The spread between variable and fixed rates is getting wider and is as much as 70bps for your average three-year fixed rate mortgage," he said.

But he cautioned consumers to be mindful of the possibility of future rate cuts before choosing to lock in, pointing to the sudden decrease in rates during the GFC.

Related stories:

Fixed rates bank fave as DEF ban bites

Nervous borrowers looking to lock in

Fixed rates creeping up