One in five borrowers opted for a fixed rate mortgage last month despite an overall drop in demand, according to Mortgage Choice.
The company’s latest national home loan approval data shows fixed rate home loans accounted for 21.35% of all loans written during March. This was down 0.4% from the month before as the balance shifts instead towards variable rate home loans.
Mortgage Choice spokesperson Jacqueline Dearle suggests this change could be because lenders are currently offering competitive interest rates on their variable investment and owner-occupied home loan products, as well as an effect from the RBA holding the cash rate for another month.
According to the company’s national data, fixed rate demand was the highest in New South Wales and Queensland, with 25.69% and 24.29% of borrowers opting for this sort of mortgage respectively.
For the fourth consecutive month, Victoria had the lowest demand for fixed rate mortgages, with this type of product accounting for 12.77% of all home loans written.
Looking ahead, Dearle said a number of factors could influence the level of demand for fixed and variable rate home loans.
She said: “We know lenders are hungry for business from investors and owner-occupiers and already we have seen them adjusting their interest rates on both their variable and fixed rate products. In addition, while the cash rate has remained on hold, there is growing speculation that we could see a rise later in the year.
“For those looking for certainty and security around their monthly mortgage repayments, a fixed rate product may be the best for their needs. That said, interest rates remain at historically low levels, which is good news to anyone looking to buy their first property or refinance their mortgage.”
The drop in fixed rate loans was first reported by Mortgage Choice in September 2017, when just over 28% of customers opted for that option. By February 2018, this had fallen to 21.75%.