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Mortgage market more complex than ‘ever before’: Mortgage Choice

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Reporter 6 minute read

The recent rate and policy changes by lenders has made the mortgage market “more complicated and confusing than ever before”, the CEO of mortgage broking firm Mortgage Choice has said.

CEO John Flavell made the pronouncement following the release of the company’s research, which found that more than one in four borrowers chose fixed rate loans in May.

The research revealed that fixed rate loans comprised 26.43 per cent of all home loans written in May, reflecting a trend that more borrowers are opting for fixed rate loans. While the figure shows a slight drop of three basis points compared to April, it remains well about the 12-month average of 21.36 per cent.

Demand for fixed rates was highest in New South Wales and the ACT where fixed rate loans accounted for 31.53 per cent of all loans written, while in Queensland 27.71 per cent of mortgagors opted for the repayment method. In Victoria and Tasmania, demand was lowest with fixed rate loans making up 17.6 per cent of loans.


Speaking after releasing the figures, Mr Flavell commented that the figures were not “surprising”. He said: “From the data we can see that fixed rate home loans have been growing in terms of popularity in recent months. Of course when you consider what has been taking place in the market, the recent spike in fixed rate demand can hardly be considered surprising. 

“In the last month alone, we have seen a number of lenders make changes to their interest rates across their suite of products outside of any rate adjustments by the Reserve Bank of Australia.” 

Rate hikes for interest-only loans have been seen across all big four banks as well as a number of non-majors and mutuals following a directive from the Australian Prudential Regulation Authority (APRA) in March to limit interest-only lending to 30 per cent of all new mortgage lending. 

Mr Flavell said the recent series of interest rate and policy changes from banks were rendering the mortgage market “more complicated and confusing than ever before”. 

“Whilst ever there is a significant degree of complexity and uncertainty in the market, a growing proportion of borrowers will look for interest rate security and safety in the form of a fixed rate mortgage,” Mr Flavell said. 


He added that demand for fixed rates should remain strong into the future as lenders ‘tweak’ policies and pricing to fall in line with both regulatory measures and business needs.

The research backs that undertaken by Ipsos for Gateway Credit Union in May, which found that almost one in five respondents with a variable or split rate home loan are looking to make the switch to a fixed rate.

The survey of 1,029 respondents across Australia revealed that, of those looking to make the switch, 38 per cent said they would do so in the next three to six months, while 24 per cent said they would do so in the next six to nine months.

Gateway CEO, Paul Thomas, said the results could be indicative of the rising financial pressure households are under.

“It seems borrowers are betting that rates will be on the rise towards the end of the year or early next year. However, mortgage holders who are concerned about covering their repayments if rates were to rise should be thinking about locking in a fixed rate sooner rather than later to take full advantage of the historically low rates,” he said.

He added: “The fact that mortgage holders are looking to switch their home loans to fixed rate products over the next three to nine months just goes to show that there is a sentiment of concern. Factors such as out-of-cycle rate hikes, the new bank levy, stagnant wage growth and high levels of household debt are all converging to create an environment where borrowers need to act with caution. The beauty of fixed rate products is their ability to secure certainty and to help households avoid financial distress.”

[Related: Bank raises rates, sets sights on brokers]

Mortgage market more complex than ‘ever before’: Mortgage Choice
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