Fixed-rate mortgage demand rises to highest level in five years led by NSW home buyers: Mortgage Choice

Fixed-rate home loans accounted for more than a quarter of all successful home loan applications submitted by Mortgage Choice brokers on behalf of borrowers in April, the highest level in five years, led by a big rise in demand from NSW borrowers.

April figures show that 28.04% of all new Mortgage Choice-submitted home loans approved in April were on fixed rates, up from 27.58% in March and 18.41% in February, the highest level of interest in fixed rate loans since March 2008, when demand reached 34.87%.

In March 2008, the cash rate rose to 7.25% prompting many borrowers to fix, most disastrously, as the cash rate then tumbled to just 3% by April 2009 as the Reserve Bank took emergency measures to prop up borrowing and spending in the wake of the GFC.

However with the cash rate now near record lows at 3% and at most two more rate cuts pencilled by some economists (others like Michael Blythe at the Commonwealth Bank tip no more rate cuts), borrowers are unlikely to lose out to the same extent should the cash rate fall further.

The rise in demand for fixed-rate home loans comes as lenders continue to cut their fixed-rate offerings in an attempt to lock in customers.

Citibank was the most recent to do so with its two-year fixed falling to 4.89% this week while last week NAB cut its five-year fixed rate home loan to a twenty-year-low of 5.55%.

Demand for fixed-rates rose steeply in NSW by 7.94 percentage points to 32.45% of all home loans.

Demand for fixed-rate home loans fell 6.53 percentage points in Queensland, indicating perhaps less jittery borrowers, but it still remains the second most popular state for fixed-rates at 30%.

Victorian appetite for fixed-rates is weakest across the states with just over one in five borrowers (21%) willing to fix.

“With a number of lenders still offering highly competitive fixed rate loans, it is not surprising that borrowers have been taking advantage of the deals available and that the national percentage of fixed rate loan approvals has increased,” says Mortgage Choice spokesperson, Belinda Williamson.

“What came as a surprise was that the majority of states – Queensland, South Australia and Western Australia – saw demand for fixed rate loans fall, albeit slightly. With no obvious economic factors instigating the trend, it may be a sign of growing consumer confidence. Time will tell!”

Ongoing discount rate home loans, where the rate is discounted for the life of the loan usually in exchange for a monthly fee, rose to 38% of all home loans – the most popular product – followed by the standard variable home loan (14%) and no-frills basic variable (13%).