Fixed rate demand is stable

October 24, 2019

Demand for fixed rate home loans was stable in September, reveals data from Mortgage Choice. 

According to the Company’s home loan approval data, demand for fixed rate home loans has remained stable since July, accounting for 14% of all home loans written throughout the month of September.
  
Mortgage Choice Chief Executive Officer Susan Mitchell said, “Our home loan data reveals demand for fixed rate loans fell to an eight year low in July this year and has remained at the same level since.

“This reduction in demand for fixed rate home loans is reflected in the ABS (5601.0) data, which shows that the proportion of owner-occupier borrowers opting for a fixed rate has declined since June.

“We have now seen the Reserve Bank lower the official cash rate three times this year. The Bank’s decision to cut in October brought the cash rate to a new historic low of 0.75% putting further downward pressure on variable rate home loans. 

“And, while lenders didn’t pass on the third cash rate cut in full, there is speculation that the cash rate will fall even further, giving borrowers even more incentive to opt for a variable rate loan.

“Despite lenders’ efforts to attract borrowers to lock in the interest rate on their home loans by dropping fixed rate pricing, fixed rate demand is unlikely to return to the levels we saw in Spring last year, where fixed rate loans accounted for a quarter of all home loans.

“The majority of borrowers are happy to bide their time and ride the variable rate wave but fortunately, borrowers who want repayment certainty could access some of the lowest fixed rates in recent memory.

“Fixed rate loans might be particularly attractive to those buying their first home this Spring. First time buyers who need to learn to balance their budget and home loan repayments may want to consider fixing part or all of their home loan,” said Ms Mitchell.

Demand for fixed rate loan products varied across the country. Borrowers in Western Australia were the least likely to fix (9%) followed by Victoria (11%). 

At the other end of the spectrum, borrowers in New South Wales were the most likely to fix their home loan interest rate, with 17% choosing this type of product.

Ms Mitchell said, “If you’ve been in the same home loan product for the last few years and you feel you might be paying too much for your loan, now is the time to negotiate a better deal.

“Lenders continue to aggressively discount their products to attract new customers, which means there’s no reason for you to be paying more for your home loan.

“Make an appointment to speak to your local Mortgage Choice broker to discuss your options. They will assess your financial situation and goals and compare a range of home loan products to help you decide if you’re still in the right loan for your needs,” concluded Ms Mitchell.