A quarter of borrowers now choosing fixed-rate loans: Mortgage Choice
The November and December interest rate cuts did nothing to dampen borrower enthusiasm for fixed-rate mortgages, which surged to nearly a quarter (24%) of all mortgages approved by Mortgage Choice brokers in December.
The December figure is 3% higher than fixed-rate loan approvals recorded in November and the seventh consecutive month (since June 2011) that fixed rates have grown in popularity.
Demand for fixed-rate mortgages is now at a three-and-a-half-year high, with customer demand for variable rate loans falling from 79% to 76% over the month.
Demand for fixed-rate mortgages is also well above both the 12-month average (15%) and the six-month average (18%).
The growing appetite for fixed-rate loans comes despite the pace of fixed-rate cuts dropping off ahead of the Christmas break and mortgage market analysts forecasting demand for the products to fall as the RBA enters a rate loosening phase.
Westpac brands the Bank of Melbourne and St George cut their fixed rate mortgages on December 22.
Source: Mortgage Choice
According to Mortgage Choice spokeswoman Belinda Williamson cheap rates and the repayment certainty are two factors that may convince borrowers to choose a fixed-rate product.
“Consecutive cash rate cuts in November and December 2011 have not swayed Australian borrowers’ desire for fixed-rate loans,” she says.
“It is possible borrowers’ need for certainty around their home loan repayments, coupled with the affordability of fixed-rate loans, are the driving forces behind demand for this loan type.
“During December fixed rates were significantly lower than variable rates, in some cases the difference was one percentage point or more.”
According to Mortgage Choice data, demand for ongoing discount mortgages – where the rate is discounted over the life of loan – dropped from 44% to 41%, but this type of mortgage still remains the most popular product offering and its popularity remains above a 12-month average of 35% of all mortgages.