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Fixed rate demand fell to eight-year low after RBA rate cut

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Reporter 5 minute read

The demand for fixed-rate mortgages dropped to an eight-year low in June this year, according to newly released data.

New data from Mortgage Choice has revealed that customer demand for fixed rate home loans fell in June after the Reserve Bank of Australia (RBA) cut the official cash rate for the first time in nearly three years.   

In June, fixed-rate home loans accounted for 22 per cent of all mortgages written by the broking franchise, down 47 basis points from the 22.47 per cent recorded in May.

The demand for fixed-rate mortgages was highest in NSW (23.89 per cent) and Queensland (23.15 per cent), followed by Western Australia (20.68 per cent), South Australia (18.14 per cent) and Victoria (13.87 per cent). 

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Commenting on the data, Mortgage Choice CEO Susan Mitchell said the drop in demand for fixed-rate mortgages is “hardly surprising” given the flurry of interest rate cuts that followed the RBA’s move. 

“If we look at the split of variable rate and fixed rate home loans at the end of last week, we can see a clear shift towards variable rate loans,” she added.

“In fact, this type of loan product accounted for 86.5 per cent of home loan applications submitted by our broker network, and only 13.5 per cent of customers chose to fix. 

“What is truly shocking about this data is that demand for fixed rate loans has not been this low in almost eight years.”

Variable rate home loans continued to make up the majority of loans written by Mortgage Choice brokers, accounting for 79.14 per cent in June, compared to 77.53 per cent in May.

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The most popular variable rate products were ongoing discount, which accounted for 39.51 per cent of variable loans written in June, followed by basic variable and standard variable loans, which accounted for 21.23 per cent and 15.51 per cent, respectively.

“The high level of demand for variable rate loans with an ongoing discount reveals that many of our customers are receiving a discount on packaged home loans beyond what lenders are offering. This increase in demand is a combination of our brokers negotiating a better rate with lenders and customers actively asking for a better rate,” Ms Mitchell said.

“That being said, I think it’s important for borrowers who may be considering a fixed rate to know that we have seen a significant reduction in fixed rates offered by the lenders on our panel, which suggests that the outlook is for rates to remain lower for longer.”

Mortgage Choice’s June approval data showed that variable rate demand was highest in Victoria, where 86.13 per cent of borrowers opted for this type of product, followed by South Australia (81.86 per cent), Western Australia (79.32 per cent) and Queensland (76.85 per cent).

NSW borrowers were the least likely to apply for a variable rate mortgage, with 76.11 per cent choosing this type of product.

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Fixed rate demand fell to eight-year low after RBA rate cut
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