Nearly a third of borrowers fixed their home loan rate in May: Mortgage Choice

Nearly a third of borrowers fixed their home loan rate in May, according to home loan approval figures from Mortgage Choice.

This is despite the RBA cutting the cash rate to 2.75% and with further rate cuts expected, but also as lenders continuing to discount their fixed-rate offerings with the Commonwealth Bank the latest lender to do so last week, now offering a three year fixed-rate of 4.99%.

Fixed-rate loans amounted to 30.10% of all new loans submitted by Mortgage Choice brokers and approved by lenders during the month of May.

This is the fourth consecutive month that demand for this loan type has risen – rising by 13.75 percentage points since January.

The figures come out one month ahead of the official ABS housing finance data. April ABS data showed fixed-rate demand at five year highs with one-in-five fixing their home loan.

Mortgage Choice accounts for around one in 10 home loan arranged in Australia and its monthly updates are a good lead indicator of national demand.

Ongoing discount variable rate home loans remain the most popular loan type accounting for 38% of all approved loans over May. Discounted rates are usually offered as part of a home loan package deal.

They are followed by standard variable  and basic variable with 13% each of the home loan market.

Queenslanders continue to be the most conservatively-minded borrowers with the state recording the greatest rise in fixed rate demand up by 7.43 percentage points to reach 37.84% - the highest all the states.

All states apart from Victoria/Tasmania recorded a rise in fixed-rate home loan approvals (21% of loans) with a third of NSW borrowers (33%) fixing their home loan in May. 

“For four consecutive months now a growing number of new borrowers have chosen a fixed rate loan. In fact, the uptake of fixed rate loans now sits almost seven percentage points above the six-month average," said Mortgage Choice spokesperson Belinda Williamson.

“Given the ongoing, competitive pricing of fixed rate loans, it is possible that new borrowers choosing this loan type are motivated less by the peace of mind offered by steady repayments and more by the current offers.