Falling demand for fixed rates

Despite industry-wide reductions, consumers wary of locking in rates amidst unstable lending environment

Falling demand for fixed rates


By Madison Utley

The CEO of a mortgage broking firm has linked new data showing a decline in demand for fixed rate home loans to consumer caution over the many variables likely to play out in the coming months.     

“There is a great deal of uncertainty surrounding the housing market at present, which could be weighing against borrowers’ decisions to commit to a fixed term,” explained Mortgage Choice CEO Susan Mitchell.

“The outcome of the upcoming federal election carries potential policy implications that could affect people’s willingness to buy. There is also increasing speculation that the RBA will cut the official cash rate in the short-term,” she added.

According to Mitchell, the widespread fixed rate cuts evidenced at the big four all the way through to small non-banks directly stem from borrowers’ reluctance to commit to a rate. 

“Major lenders and smaller lenders alike are attempting to lure borrowers to their fixed rate products by announcing reductions of up to as much as 55 basis points," said Mitchell.

The latest loan approval data from Mortgage Choice shows that fixed rate loans accounted for 21% of home loans written in March, down 1.35% from the month prior.

Demand for fixed rates was highest in New South Wales, accounting for 26% of home loans written in March. Demand was lowest in Victoria at 14%.

The most popular home loan product was ongoing discount variable rate loans, followed by basic variable rate loans.

“The home loan market is fiercely competitive at the moment. My advice to borrowers who want to hedge out the risk of interest rate changes would be to speak to their local mortgage broker to learn if fixing all or part of their home loan is the right decision for them,” concluded Mitchell.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!