April 04, 2016
A jump in fixed rate demand means this type of product now accounts for almost one in every four home loans written.
According to Mortgage Choice's latest national home loan approval data, fixed rate home loans accounted for 23.15% of all loans written throughout the month of March – up 0.87% from the 22.28% recorded the month prior.
“I wasn't surprised to see fixed rate demand rise over the month of March and I believe it is a sign of things to come,” Mortgage Choice chief executive officer John Flavell said.
“Last week, it was announced that 15 of Australia's largest banks will soon be forced to meet new rules that will limit their reliance on short-term wholesale funding.
“These new rules could force bank funding costs higher. If this happens, we may see some of Australia's lenders passing on these higher costs to their customers by way of higher rates. As a result, I wouldn't be surprised to see an increasing number of borrowers looking to fix their mortgage to avoid any potential rate increases.”
Looking across the country, demand for fixed rate products was highest in Western Australia, with this type of product accounting for 26.91% of all home loans written throughout March.
New South Wales was next in line, with fixed rates accounting for 26.40% of all loans written. Victoria on the other hand, boasted the lowest demand for fixed rate home loans, with this product accounting for just 12.70% of all home loans written.
Despite the small lift in fixed rate demand across the country, variable rate home loans – specifically ongoing discount products – continued to prove the most popular with borrowers.
In New South Wales, ongoing discount products accounted for an astonishing 51.28% of all loans written throughout the month.
Speaking about the results, Mr Flavell said ongoing discount home loans will always prove popular with borrowers as they seek to hunt down a competitive interest rate.
“Variable rate loans will no doubt remain the most popular product with borrowers for years to come as it allows them to take advantage of rate reductions when they occur. That said, given that the interest rate market is incredibly volatile, I would expect to see more borrowers looking to lock in at least part of their mortgage,” he said.
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