A major mortgage brokerage has revealed that it is seeing an increasing proportion of people opt to lock in interest rates on their mortgages, with nearly 23 per cent of all loans written in January 2017 being for fixed rate mortgages.
According to the home loan approval data from Mortgage Choice, demand for fixed rate home loans has risen for five consecutive months, and accounted for 22.97 per cent of all loans written by the company in January (up from 22.04 per cent in December 2016 and 19.51 per cent in November).
Demand for fixed rate home loans was strongest in NSW (28.07 per cent of all loans), followed by Western Australia (27.67 per cent) and Queensland (24.09 per cent).
Those in Victoria were markedly less hungry for fixed rate home loans, with just 13.91 per cent of all loans written throughout January being for this type of mortgage.
Variable rate home loans, specifically ongoing discount products, remained the most popular product with Mortgage Choice borrowers across the country. However, in the midst of record-low interest rates, more borrowers appear to be opting to fix their interest rates in preparation of a potential rate hike in future.
Speaking of the figures, Mortgage Choice chief executive officer John Flavell said: “The last time fixed rate demand was this high was back in May 2016.
“It would seem the threat of rising interest rates is enough to encourage a growing proportion of Australian mortgage holders to partly or wholly fix their home loan.
“And while it will remain to be seen what the Reserve Bank of Australia does at next week’s board meeting, it is fair to suggest that future rate increases are now more likely than not. As such, it isn’t surprising to see an increasing proportion of borrowers opting for a fixed rate home loan.”
Looking ahead, Mr Flavell said he expects demand for fixed rate loans would continue, especially if the RBA lifts rates in the near future.
Mr Flavell concluded by saying that regardless of whether borrowers were opting for fixed or variable rate home loans, they can be guaranteed of securing a sharp rate.
“Interest rates are still incredibly low by historical standards, making now a great time to be a borrower or a buyer,” he said.
[Related: Fixed rates on the rise]