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Fixed rate demand drops to 21-month low

crisis crisis
Reporter 4 minute read

Demand for fixed rate mortgages has fallen to a 21-month low, new ABS data has revealed.

According to the latest Housing Finance data from the Australian Bureau of Statistics (ABS), the portion of borrowers that applied a fixed rate to their home loan dropped to the lowest level since September 2016 (11.2 per cent), from 13.2 per cent in April to 12.1 per cent in May.  

Money editor at finder.com.au Bessie Hassan claimed that borrowers are reluctant to apply a fixed rate to their mortgage amid the record low cash rate of 1.5 per cent.

“The fact that the cash rate remains at a historical low with no change in almost two years indicates that there’s less urgency among Aussie home owners to lock in a rate. They’ve been riding this wave for a while now; however, the tide could be turning,” Ms Hassan said.

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Pointing to a recent survey of leading economists conducted by Finder, Ms Hassan suggested that with the next rate move from the Reserve Bank expected to be a rise, borrowers might want to consider refinancing to a fixed rate.

“A rate rise is a matter of ‘when’ and not ‘if’ — with 84 per cent of leading economists predicting the next cash rate move to be in a positive direction,” the money editor continued.

“With this in mind, now might be a good time to consider locking in your rate, especially given the number of out-of-cycle rate changes we’ve seen in recent weeks.”

Over the past few weeks, several non-major lenders — including Macquarie Bank, AMP, ING, Bank of Queensland, Heritage Bank and Auswide Bank — have announced increases to their variable rate home loan offerings, with most attributing their decision to a rise wholesale funding costs.

Conversely, most of the aforementioned lenders, including Macquarie and AMP, have reduced rates on their fixed rate loans.

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“With more than half of Australian mortgage holders already admitting they couldn’t handle a $100 rise in monthly repayments, it’s evident many Aussies are already faced with mortgage stress,” Ms Hassan said. 

“Refinancing could save you thousands. Additionally, fixing could give you the added peace of mind you’ll be able to keep up with your mortgage repayments, regardless of any future rate changes.”

The ABS data also reported that proportion of loans issued to first home buyers remained stable at 17.6 per cent, with an average loan size of $344,600.

[Related: Lenders hike rates as funding costs spike]

Fixed rate demand drops to 21-month low
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