New figures show August saw a small increase in demand for fixed rate home loans as borrowers looked to make the most of the low interest rate environment.
August figures from major mortgage franchise Mortgage Choice show fixed rate home loans accounted for 20.32% of all loans written throughout the month, which represented a small increase on the 20.24% they accounted for over July.
While the increase in demand for fixed loans was relatively small over August, Mortgage Choice chief executive officer John Flavell
said that was not unexpected given the action of lenders following the Reserve Bank of Australia’s (RBA
) August rate cut.
“[The] slight lift in fixed rate demand is largely unsurprising,” Flavell said.
“While the official cash rate was cut by 25 basis points, Australia’s lenders failed to pass on the rate cut in full, with some cutting their residential home loan rates by just 12 basis points,” he said.
According to Flavell, the fact that the vast majority of lenders did not pass on the full rate cut could very well lead to an increase in demand for fixed rate loans in the near future as borrowers realise future cash rate cuts may not benefit them.
“Given the Reserve Bank of Australia held the cash rate at 1.5% in September, we might start to see more interest in fixed rate home loans as people start to question if now is a good time to lock in a rate,” he said.
“If the Reserve Bank does cut the cash rate again, it is clear that Australia’s lenders are unlikely to pass on the full rate reduction.”
Across the country, fixed rate demand was highest in Western Australia, accounting for 25.78% of all home loans written throughout the month of August.
Queensland and New South Wales were not far behind, with fixed rates accounting for 24.72% and 22.91% respectively of all loans written over the month.
Demand for fixed rate home loans was lowest in Victoria, accounting for just 9.06% of all loans written.
Overall, variable rates were the most popular product amongst borrowers, with ongoing discount rates accounting for 45.14% of all loans written.