Fixed rate demand highest in three years

More borrowers are flocking to fixed rate loans as market activity and bank pricing changes create added uncertainty for consumers

Fixed rate demand highest in three years



The demand for fixed rate mortgages has moved upwards to its highest level in more than three years, according to new research.

The latest national home loan approval data from Mortgage Choice found that fixed rate home loans made up 29.63% of all loans written throughout July.

“This is the highest level of demand we have seen for fixed rate home loans since December 2013, when fixed rate home loans accounted for 33.06% of all loans written,” Mortgage Choice chief executive officer John Flavell said.

This surge in popularity did not come as a surprise, however, especially with market activity over the past few weeks, he added.

“A few of Australia’s lenders have lowered the interest rates charged on some of their fixed rate products, with some trimming up to 10 basis points from their four and five year rates. As a result, many of the fixed rate home loans now on offer are very competitively priced.”

Flavell also highlighted other activity in the marketplace including a raft of additional policy and pricing changes introduced by many Australian lenders.

“Some lenders have significantly increased their interest only pricing across both their investment and owner-occupied products. These changes have helped make the mortgage market more complex than ever before.”

This means borrowers wanting security and certainty around their repayments were more likely to turn to a fixed rate mortgage, he said.

Fixed rate demand was on the increase in all states throughout July. Western Australia had the highest proportion with fixed rate loans making up 35.77% of the total loans written during that month. New South Wales came in second place with 33.59% of all loans while Queensland followed at 28.08%.

Variable rate loans still remained the most popular product for borrowers in Australia, particularly around ongoing discount loans which accounted for 40.71% of all loans written.

Flavell expressed uncertainty around whether future borrowers would continue to opt for fixed rate home loans or ride the changes through a variable rate.

“Borrower demand for certain products will be dictated by what happens in the market,” he said.

“For example, if we continue see added complexity in the market – with lenders making changes to their pricing and policy – I would expect to see more borrowers opting for the security of a fixed rate loan.”

Whatever happens though, Flavell advised borrowers and prospective buyers to be aware that home loan rates are still at historically low levels.

“Whether you’re looking to buy your first property, upgrade, refinance, or even renovate, now is a great time to make your property goals a reality.”

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