Demand for fixed-rate mortgages climbs to six-month high: Mortgage Choice

As lenders continue to cut fixed-rates, demand for this mortgage type rose to a six-month high, according to October mortgage approval figures from Mortgage Choice.

Over the month, 22% of all new home loans taken out by new borrowers via a Mortgage Choice broker were for fixed rates, just above the 12-month average of 21%.

The most recent lender to cut its fixed-rate mortgages was Credit Union Australia (CUA), the nation’s biggest customer-owned lender, which dropped its one, two and three-year fixed rate home loans to 5.3% this week, following moves by other lenders throughout the month.

Currently, three lenders offer a one-year fixed rate home loan under 5% while Mortgage Choice says seven lenders on its panel dropped their fixed-rate loans over the past week.

Of those borrowers who did lock in a fixed-rate, the most popular term (74% of all fixed-rate home loans) was three years, followed by two-years (16%).

Only 5% of fixed-rate borrowers chose a one-year fixed rate term.

“Following speculation last month of fewer rate cuts to come this year, and the latest CPI data hinting at less rate activity, it comes as no surprise that borrowers are taking advantage of the good fixed rate loan offers available. By securing their interest rate they are also locking in peace of mind over the next few years," says Mortgage Choice spokesperson Belinda Williamson.

The Mortgage Choice October figures also show a considerable uplift in the preference for ongoing discount rates loans, reaching 40% of all new loans approved. This follows two consecutive monthly drops in demand in August and September.

 “There was a downward trend on the popularity of discount rates loans – where the loan is discounted over the entire loan term – in the months before October, as economists were predicting a number of rate cuts by the Reserve Bank before the end of the year,” says Williamson.

“This month appeared to buck this trend however, as we saw an increase in ongoing discount rate loan appeal. As the talk of further rate cuts dries up, this increase shows more borrowers are now shopping around for long-term bargains.”

Standard variable rate loan demand fell by three percentage points to 15% of all new loan approvals, while the preference for basic variable rates remained steady at 19%.

Demand for line of credit loans - popular with investors - fell by one percentage point to 3% and introductory rate popularity remained at less than 1%.