Fixed rate demand falls

August 21, 2019

Demand for fixed rate home loans fell in July, reveals data from Mortgage Choice.

According to the Company’s home loan approval data, demand for fixed rate home loans fell over the month of July, accounting for 14% of all home loans written.

Mortgage Choice Chief Executive Officer Susan Mitchell said, “Demand for fixed rate loans is the lowest we’ve seen all year. Despite some very attractive fixed-rate home loan pricing, borrowers across the country are reluctant to fix.

“Last year, a low fixed rate would have been under 4% p.a., but today we are seeing rates starting with a 2, which is certainly the lowest fixed rates we have seen in recent history.

“It’s not entirely surprising that borrowers are choosing to keep their options open by opting for variable rate home loans. The reality is, the opportunity to save on repayments if the Reserve Bank cuts the cash rate is too good to pass up.

“In the minutes of the RBA Board’s August meeting released yesterday, members judged it reasonable to expect that an extended period of low interest rates would be required and suggested that further easing of monetary policy may be on the cards,” said Ms Mitchell.

Demand for fixed rate loan products varied across the country. Borrowers in Victoria were the least likely to fix (7%) followed by South Australia (12%). Borrowers in New South Wales were the most likely to fix their home loan interest rate, with 19% of borrowers preferring a fixed-rate home loan.

Ms Mitchell said, “While borrower preference has been leaning towards variable rate loans recently, there are still many reasons why it may be a good time for borrowers to fix part or all of their home loan.

“The certainty that comes from knowing exactly how much your home loan repayment will be each month brings peace of mind to many borrowers, especially first time buyers who are adjusting to life with a home loan. As the interest rate on a variable rate home loan may change over time, it can be harder for these borrowers to manage their budget and continue to meet their loan repayments if interest rates do eventually rise.

“My advice to borrowers who are considering switching their home loan would be to have their current loan reviewed by an experienced mortgage broker. It won’t cost you to get a home loan health check and you may learn that there are better deals on the market that could help you pay off your loan faster or reduce your repayments, for example.

“The home loan market is particularly competitive at present, with lenders offering deals for new borrowers, which means that if you are considering buying your first home, upgrading or refinancing your home loan, there’s arguably never been a better time.

“Speak to your local Mortgage Choice broker today to get a home loan health check and learn what your home loan options are,” concluded Ms Mitchell.