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Fixed rate demand jumps as variable rates rise

by Charbel Kadib4 minute read

A rise in demand for fixed rate home loans has coincided with out-of-cycle variable rate hikes from lenders,with NAB the latest bank to lift rates. 

According to the latest AFG Mortgage Index, the number of fixed rate home loans settled by the aggregator’s broker network increased by 4.1 per cent over the second quarter of the 2019 financial year (2Q19), from 19 per cent to 23.1 per cent.

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This was the second quarterly rise in fixed rate home loan demand, following a 3.3 per cent increase over 1Q19 from 15.7 per cent.

The rise in fixed rate demand reported by AFG has coincided with an out-of-cycle variable interest rate hike by NAB, which lifted rates by up to 16 basis points.


NAB’s decision to reprice its mortgage offerings followed moves from the Bank of Queensland and Virgin Money, which increased their home loan rates by 18 basis points and 20 basis points, respectively.

These latest moves marked the beginning of a second wave of out-of-cycle rate hikes.

Throughout 2018,  several lenders, including ANZ, the Commonwealth Bank of Australia, and Westpac, increased rates out-of-cycle.

Despite monetary policy inaction from the Reserve Bank of Australia, which has held the official cash rate at 1.5 per cent, lenders have attributed their decisions to lift rates to a sustained rise in wholesale funding costs.  

The AFG data also revealed that brokers are increasing competition in the home loan market by distributing mortgages through different lender segments. 

According to the AFG index, the proportion of loans sent to non-major lenders for the period hitched up to 42.1 per cent in the final quarter of the calendar year (up 1.8 per cent on the previous quarter), the highest proportion ever recorded by AFG brokers. 

The non-majors saw market share gains recorded for refinancers (now 46.8 per cent), upgraders (42 per cent), first home buyers (32.1 per cent) and investors (43.4 per cent). 

Likewise, the proportion of loans sent to the big four banks dropped to its lowest recorded proportion, falling to 57.9 per cent. 

This marks a notable drop in the number of loans being sent to the major banks – with the prior comparative period being 6.2 percentage points higher (at 64.1 per cent) and the prior quarter being nearly 2 percentage points higher (at 59.7 per cent). 

[Related: Brokers send record volumes of loans to non-majors]

Fixed rate demand jumps as variable rates rise
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Charbel Kadib

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.


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