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Fixed rate demand drops for eighth consecutive month

crisis crisis
Reporter 4 minute read

As the cash rate continues its record-breaking run of inertia, borrowers are still looking to capitalise on continually low interest rates, with demand for fixed rates continuing to take a hit, according to new data.

Mortgage Choice’s latest national home loan approval data has revealed that variable rate mortgages accounted for 82 per cent of all loans written in May, up by 2.0 per cent from the previous month, and almost 7.0 per cent higher than the 12-month average.

“This trend will continue as borrowers develop apathy towards the Reserve Bank of Australia’s stagnant cash rate,” Mortgage Choice CEO Susan Mitchell said.

“Indeed, we continue to see borrowers opt for the flexible nature of variable rate home loans which may offer a redraw facility, offset accounts and the ability to make extra repayments. These features are not typically associated with fixed rate loans.
“While a fixed rate product provides repayment certainty, variable home loan rates have been relatively stable for a prolonged period of time, giving borrowers little incentive to fix.”
Ms Mitchell also pointed to housing finance data from the Australian Bureau of Statistics (ABS), which found that 52,116 home loans were approved throughout April, down by 1.4 per cent from the previous month.


The ABS data also found that the total value of home loans fell by 0.2 of a percentage point, driven by a 0.9 of a percentage point drop in the value of investor loans, to $10.7 billion. However, the total value of owner-occupied loans grew by 0.2  of a percentage point over the same period.  

Ms Mitchell said that she wasn’t surprised by the fall in the value of investor loans, attributing the drop to tighter lending standards and serviceability policies.

“However, May data may show an increase in investment loans following [the Australian Prudential Regulation Authority] lifting the cap on investor loan growth at the end of April,” the CEO added.

The brokerage CEO also noted the rise in the number of loans written for first home buyers (FHBs), as revealed by the ABS data, which increased from 13.7 per cent in January to 17.6 per cent in April.
“This increase is significant and first home buyers seem to be propping up the market,” Ms Mitchell noted.

Ms Mitchell said that she expects a number of factors, including historically low interest rates, easing property prices and access to first home owners grants (FHOGs), to sustain home loan demand from the FHB market.

[Related: Cash rate stagnation continues]


Fixed rate demand drops for eighth consecutive month
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