Fixed rate demand returns to previous highs

December 04, 2015

After hitting a four year low in October, fixed rate demand has bounced back over the month of November.

According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for 17.39% of all loans written throughout the month of November – up from 13.88% recorded the month prior.

Mortgage Choice chief executive officer John Flavell said the bounce back in fixed rate demand wasn't surprising when you consider that most of Australia's lenders recently lifted the interest rates across their suite of variable home loan products.

“At the end of October, the majority of Australia's lenders lifted the interest rates on their suite of variable home loan rate products,” he said.

“The interest rate increases were made outside of any movements by the Reserve Bank of Australia, which sent shockwaves through existing and potential property buyers.

“As a result of those rate hikes, an increasing number of new buyers are looking to fix at least part of their mortgage as they seek out security and surety around their mortgage repayments.”

Across the country, demand for fixed rate home loans was strongest in NSW, with this type of product accounting for 24.59% of all loans written.

Western Australia and Queensland were next in line, with fixed rate demand accounting for 16.81% and 15.83% respectively. At the other end of the spectrum, demand for fixed rate products was lowest in Victoria and South Australia, with this product accounting for 8.89% and 12.37% of all loans written.

While demand for fixed rate products improved in four of the five states, ongoing discount variable rate products continue to prove the most popular with mortgage holders, with this type of product accounting for 51.78% of all loans written throughout the month of November.

“Looking ahead, I would expect to see greater demand for fixed rate home loan products,” Mr Flavell said.

“Australia's lenders made it clear in October when they raised their rates that additional rate hikes could be on the cards. In order to avoid any future rate hikes and obtain some surety around their mortgage repayments, I believe we will see more Australians locking into a fixed rate home loan.

“But while it is likely interest rates will continue to go up down the track, the reality is they are still incredibly competitive and regardless of whether a mortgage holder takes on a variable or fixed rate mortgage, they can be assured of securing a great deal.”