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Fixed rate demand stays soft

by Annie Kane5 minute read

Fixed rate demand remains at record-low levels, with borrowers in Western Australia least likely to fix their mortgage rates, new data has shown.

According to home loan approval data from Mortgage Choice, just 14 per cent of all home loans written by Mortgage Choice brokers in the month of September 2019 were for fixed rate mortgages.

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The statistics show that demand for this type of loan continues to be soft, after levels dropped to an eight-year low in June of this year.

The figures echo those released by the Australian Bureau of Statistics, which revealed that the proportion of owner-occupier borrowers opting for a fixed rate has declined since June. For example, in August 2019, fixed rate loans accounted for 12 per cent of owner-occupier mortgages, up from 10.4 per cent in July 2019 and markedly down from the first half of the year, when the proportion was holding firm around 16 per cent.


The softening of demand for fixed rate comes following multiple rate cuts from the central bank, which in turn has seen lenders drop variable rates to record-low levels, with some variable mortgage rates dipping below 3 per cent p.a. for the first time.

Mortgage Choice chief executive Susan Mitchell commented: “We have now seen the Reserve Bank lower the official cash rate three times this year. The bank’s decision to cut in October brought the cash rate to a new historic low of 0.75 per cent, putting further downward pressure on variable rate home loans.

“And while lenders didn’t pass on the third cash rate cut in full, there is speculation that the cash rate will fall even further, giving borrowers even more incentive to opt for a variable rate loan, she added.

“Despite lenders’ efforts to attract borrowers to lock in the interest rate on their home loans by dropping fixed rate pricing, fixed rate demand is unlikely to return to the levels we saw in spring last year, where fixed rate loans accounted for a quarter of all home loans.

Ms Mitchell noted that while the majority of borrowers might be happy to bide their time and ride the variable rate wave”, those who do opt for fixed rates can now “access some of the lowest fixed rates in recent memory.

“Fixed rate loans might be particularly attractive to those buying their first home this spring. First-time buyers who need to learn to balance their budget and home loan repayments may want to consider fixing part or all of their home loan,” said Ms Mitchell.

The Mortgage Choice figures also showed that demand for fixed rate loans varied across the nation.

In September 2019, borrowers in WA were the least likely to fix (9 per cent), with the vast majority (90.6 per cent) instead opting for variable rate loans.

Appetite in Vic and SA was slightly higher, at 11.3 per cent and 12.4 per cent, respectively.

At the other end of the spectrum, borrowers in NSW were the most likely to fix their home loan interest rate, with 17 per cent choosing this type of product, followed by those in Queensland (14.1 per cent).

[Related: FBAA backs new mortgage pricing inquiry]

Fixed rate demand stays soft
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Annie Kane

Annie Kane


Annie Kane is the editor of The Adviser and Mortgage Business.


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