Demand for fixed rate home loans has dropped amid speculation of a further cash rate cut, which will take the official interest rate below 1.75%.
According to data from major mortgage franchise Mortgage Choice
, demand for fixed rate home loans 0.52% in June, accounting for just under a quarter (23.89%) of all home loans settled.
Mortgage Choice chief executive John Flavell said many borrowers flocked to variable rates after the Reserve Bank cut the cash rate to 1.75% in May and expects this to continue in an uncertain cash rate environment.
“It is clear Australians want to take full advantage of the current low rate environment. And as speculation about another rate cut this year continues to grow, I would expect variable rate demand to strengthen further.”
This is despite many lenders announcing interest rate reduction on many fixed rate home loan products, Flavell said.
“In recent weeks, we have seen a number of lenders slash the interest rates across their suite of fixed rate home loans. As a result, these products are now very sharply priced,” he said.
“That said, it is fair to say interest rates are very low across the board. So, regardless of whether a borrower takes out a variable rate or fixed rate mortgage, they can be assured of securing themselves a competitive interest rate.”
Demand for variable rates was highest in Victoria, with this type of product accounting for 86.35% of all home loans written throughout the month.
South Australia was not far behind, with variable rates accounting for 84% of all loans written.
Demand was lowest in Western Australia, with this type of product making up just under three quarters (73.36%) of all loans written.
Of the different variable rates on offer, ongoing discount products continued to prove the most popular with borrowers, with this type of product making up almost half (48.98%) of all loans written throughout the month of June.