Demand for fixed-rate mortgages jumps to highest level in four years: Mortgage Choice

The popularity of fixed-rate loans jumped to a four-year high in March as borrowers grew more concerned over where interest rates were heading, new Mortgage Choice figures show.

Fixed-rate loans accounted for 26% of approved home loans written by Mortgage Choice mortgage brokers in March, up from 20.6% in February and well above the 12-month average of 17.7%.

Borrowers chose fixed rate products despite 14 out of 27 lenders represented by Mortgage Choice raising their fixed interest rates over the month.

This was the highest level reached since March 2008, a time when 35% of all new home loans were fixed rates, and is well up on this same period last year when only 10% were fixed rate loans.

Mortgage broker AFG also recorded a spike in demand for fixed-rate loans in March, which soared to a record of 25.4%, just above the previous high of 25.3% recorded in February 2008.

“The record swing towards this loan type indicates borrowers have some concerns over the future direction of home loan interest rates – whether this is the Reserve Bank moving the cash rate or lenders moving their interest rates independently of this benchmark,” says Mortgage Choice spokesperson Belinda Williamson.

“Borrowers’ appetites for fixed-rate loans may have also been spurred on by competitive lender pricing.

“However, it will be interesting to see if fixed-rate loan demand tapers off in coming months, as interest rates on these products have begun edging upwards. When reviewing the rate movements across our 27-strong lender panel, 14 lenders raised their interest rates on fixed rate home loans in March,” she says.