More than one in four fixing their home loan as demand rises to five year high: Mortgage Choice

Demand for fixed-rate home loans surged in March to its highest level since the GFC, according to Mortgage Choice loan application figures.

Fixed rate demand rose 9.17 percentage points from less than one in five borrowers (18%) in February to more than a quarter (28%) of borrowers in March.

This is the highest proportion to fix their home loan since March 2008 – a disastrous move by those borrowers back then as the RBA, having lifted the cash rate  successively in February and March of 2008 to 7.25%, then proceeded to dramatically cut the cash rate to 3% between September 2008 and May 2009 to stave off the worst of the GFC.

Borrowers on fixed-rates were left with much higher mortgage repayments than equivalent variable borrowers, as mortgage rates tumbled.

Given, the cash rate is already at 3% and not expected to fall much further, fixed-rate borrowers are unlikely to burned again.

Yesterday, Citibank announced cuts to its two-year and three-year fixed rate home loans with borrowers able to secure one-year and three-year fixed-rate below 5%.

The Mortgage Choice figures show that Queensland borrowers remain the most conservatively minded with demand for fixed-rate home loans rising in the Sunshine State from 14% to 37% from February to March.

“Queenslanders continue to lead the preference for fixed rate loans, month on month. However, the biggest movement was in South Australia where demand for fixed rate loans rose by 14.1 percentage points to hit 32.26% in March,” says Mortgage spokesperson, Belinda Williamson

“At the same time, Victorians finally started to catch up to the rest of the country with the uptake of fixed rate loans rising 8.88 percentage points to 19.96%.

“This was followed closely by Western Australia where demand rose by 8.51 percentage points over the month to reach 24.25% and New South Wales, which saw only a marginal increase of 4.57 percentage points to hit 24.51%.”

Williamson warns borrowers to consider all the pros and cons of this loan type before locking in.

“Apart from the often talked about ‘break fee’, which applies if you repay your loan in full or choose to switch loans during a fixed rate loan period, there are other, often lesser known facts about fixed rates to consider when weighing up your loan options,” she says.