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Fixed rate demand hits new peak

by Staff Reporter7 minute read

Enquiries about fixed interest rate home loans have reached a post-GFC high, new data has shown.

According to statistics from Loan Market, enquiries for fixed rate products accounted for 40 per cent of June’s enquiries – a record high.

“We’re approaching a point where fixed rate products may be first consideration for homeowners. Over the past year, consumers who have fixed their interest rates have enjoyed paying rates that are roughly 100 basis points lower than those on variable rates,” Loan Market’s Mark De Martino said.

“Those locking in their interest rates have been enjoying both the security of knowing their repayments won’t change and also paying less than those on variable rates.”

Mr De Martino said that while current interest rates were an obvious factor in choosing whether or not to go down the fixed or variable route, it was crucial for homeowners to assess how future rate movements would impact their budgets.

“One of the reasons fixed rates are so popular is that most homeowners do not expect variable rates to average the present one- and two-year fixed rate terms over the same period. While the RBA is forecast to drop rates again, it’s unlikely in borrowers' minds to be a big enough drop to close the gap between fixed and variable home loans.”

Mr De Martino said what was likely to close the gap would be lenders becoming more competitive with variable rate pricing.

“Lenders have been making lots of noise that the cost-of-funds pressure that kept them from moving rates in sync with the RBA has eased. These funding improvements are paving the way for lenders to drop their variable rate prices, regardless of RBA rate movement, in a bid to gain market share,” he said.