Fixed rate home loan demand surges again

New data has found a growing proportion of borrowers are seeking the security that comes with a fixed rate home loan, according to the latest national home loan approval data from Mortgage Choice.

Fixed rate home loans accounted for 22 percent of all loans written in December, up from 19.5 percent in the month prior.

“This is the fourth consecutive month that we have seen fixed rate demand increase,” Mortgage Choice chief executive officer John Flavell said.

“With speculation mounting that the Reserve Bank of Australia could soon lift the official cash rate, it is clear that a growing proportion of borrowers wish to beat any potential rate hikes by opting for a fixed rate home loan.”

Mr Flavell said current market conditions combined with a spate of rate increases by Australia’s lenders meant a rate rise by the Reserve Bank this year was now more likely than not.

“In December, the United States’ Central Bank announced it would increase the Federal Funds rate by 25 basis points to 0.75 percent.

Furthermore, the bank indicated that the Federal Funds rate could rise by a further 75 basis points throughout 2017 – through three separate rate increases.

“Closer to home, many of Australia’s lenders have already started to raise rates across their suite of home loan products.

In addition, the Reserve Bank of Australia has stated that the time for easing the monetary policy setting has now passed.

All of these factors combined would suggest that a rate increase by the Reserve Bank could be right around the corner.

“Borrowers understand this and that is why a growing proportion of mortgage holders are opting for fixed rate products.”

Click to enlarge

Across the country, fixed rate demand was highest in New South Wales, with this type of product accounting for 27.34 percent of all loans written throughout the month of December.

“Queensland wasn’t far behind, with fixed rate home loans accounting for 24.64 percent of all loans written within the state.

At the other end of the spectrum, fixed rate demand was lowest in Victoria, with this type of product making up just 12.69 percent of all home loans written,” he said.

“Looking ahead, I wouldn’t be surprised to see fixed rate demand continue to rise across most of the states as a growing proportion of borrowers look to beat the threat of rising rates.”