NSW saw the biggest hit with 24% fewer home loans written in December, 2012 (12,135) compared with December, 2011 (16,054). WA was the only state to see an increase, with 3% more in December, 2012 (6536) than December, 2011 (6318).
Michelle Hutchison, spokesperson for RateCity, says the slow lending market is changing the way lenders compete for customers.
“We’ve never seen lenders cut variable rates while the Reserve Bank cash rate is on hold. Lenders are obviously feeling the pressure of the slow mortgage market and are doing whatever it takes to attract new customers, including cutting their interest rates out-of-cycle.
Fixed rates have been falling since mid-2011 and average fixed home loan rates are at their lowest levels ever recorded, according to RateCity.
For instance, average four-year fixed rates fell by 190 basis points since mid-2011, while average standard variable rates fell by 133 basis points.
Hutchison says, while it’s likely that more lenders will cut rates out-of-cycle, there are good value fixed home loans for borrowers that want to fix.
“If borrowers don’t return to the mortgage market we expect more lenders to follow with rate cuts this year. But with fixed rates at unusually low levels, it’s a good time to consider fixing your mortgage if you’re planning for changes to your financial situation in the coming years. Borrowers need to ask themselves, ‘can you afford a 2-3% interest rate rise? Are you planning to go away for a long period of time or start a family? Or will you undertake extensive renovations’?”
Even if rates fall further, Hutchison says they will eventually start rising - so borrowers need to think about the future and consider their options while lenders are ‘desperate’ for their business.