Fixed rates for home mortgage in favour: AFG index

Home buyers continued to take advantage of low interest rates with a greater proportion fixing their home loans in the first three months of the year, according to a report released by ASX-listed Australian Finance Group.

The start of calendar 2016 has seen lending for fixed rate products peak at 17.7 percent of AFG’s total volume for the quarter, according to the company's Mortgage Index.

By comparison, the percentage of those fixing their rates in the first quarter of the 2016 financial year was 11.4 percent. 

“With sections of the money market making the call of a rate cut in the coming months there are some very attractive fixed rates available. With rates being at historical lows the downside risk of fixing is relatively small so many borrowers are choosing to lock in now,” said Mark Hewitt, AFG general manager, Sales and Operations.

“Despite this month’s decision by the Reserve Bank of Australia to leave the cash rate on hold at a record low 2% there are also no guarantees lenders won’t make their own moves outside the RBA cycle. Some are talking about increased funding and regulatory costs and locking the low rates in now is a way borrowers can insulate themselves against any out of cycle increases by the banks. This quarter has also seen investor numbers on the rise again, with an increase from 31 percent of AFG’s total volume to 33 percent as lenders return to the investor market having fallen below the growth cap set by the regulator last year.”

AFG’s overall volume was up 5.7 percent on the same quarter in 2015, with Victoria leading the states with an increase of 15.7 percent, followed by SA up 11.3 percent, NSW up 10.5 percent and Queensland recording a rise of 7.6 percent. The resources downturn has hit WA activity with that state recording a drop of 16.7 percent and NT dropping by 28 percent on the same time last year.

“In a positive message for the health of the lending market, the average LVR (loan to value ratio) of 68 percent is the lowest it has been for three years,” said Hewitt.

“This means homebuyers are continuing to borrow within their capabilities.”