Fixed rates linger at record highs

“Over the past four months, fixed rate demand has consistently sat above 28 per cent,” CEO of Mortgage Choice John Flavell said. “The last time we saw this level of consistent fixed rate demand was back in early 2013.”

The rise has been attributed to recent rate fluctuations in the mortgage market, amid increasing fears of a rate rise from borrowers.

“Over the last few months, it has become increasingly clear that the cash rate could rise in the not-too-distant future,” Mr Flavell said.  

“Indeed, market conversations around home loan interest rates have changed from ‘if rates rise’ to ‘when rates rise’.

“Borrowers are acutely aware that a rise in the official cash rate is now largely inevitable and, subsequently, are increasingly opting for certainty and security around their mortgage repayments.” 

The CEO also believes that strong pricing competition between lenders has contributed to the demand for fixed rates mortgages.

“We continue to see Australia’s lenders adjust the interest rates on their fixed rate products for both investors and owner-occupiers,” the CEO added.

“Some have slashed the interest rates on their fixed rate products by as much as 20 basis points in recent weeks. This would no doubt influence some borrowers’ home loan product decisions.” 

According to the report, New South Wales residents who chose to apply for fixed rate mortgages amounted to 32.32 per cent, the highest level across the country.

Mr Flavell also noted that current market conditions provide future home buyers with plenty of options.

“New and existing borrowers have no shortage of choice when it comes to selecting a home loan,” the CEO said. “That said, borrowers should speak to a mortgage broker who can advise on the best product for their needs.”

[Related: Mutual banks cut owner-occupier IO rates]