By: Belinda Luc
The popularity of fixed rate mortgage products has not improved, despite most lenders slashing their interest rates.
According to the latest data from Mortgage Choice, fixed rate demand among new borrowers fell a further 0.7 per cent from May to June. In June, the percentage of new borrowers who chose a fixed interest rate loan in June was 2.6 per cent.
"Many people in the industry were expecting a rise in fixed rate demand last month but that hasn't happened with our customers. Instead we've seen this product's popularity reduce by one fifth," Mortgage Choice senior corporate affairs manager Kristy Sheppard said.
"Further, our June data shows fixed rate loans have represented less than 5 per cent of all new approvals for the past 10 months and less than 10 per cent of approvals for two years now.”
Meanwhile, standard variable rate home loans remain a popular choice for new borrowers, reaching its highest level since October 2008 at 50.1 per cent of all June loan approvals.
This was an increase of 47.8 per cent from the month prior.
According to Ms Sheppard, the shift from fixed to variable rate loans among new borrowers may be a reflection of the current interest rate climate.
"Perhaps the price tag is still too high when potential borrowers weigh up the advantages and disadvantages of fixed versus variable,” Ms Sheppard said.
"Or perhaps whispers of a much steadier cash rate are seeping through and wielding influence over borrowers’ decision processes."
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