Fixed-rate loans losing their appeal: ABS data

The appeal of fixed-rate mortgages declined for the third straight month in June to represent the lowest proportion of the owner-occupier market since September last year, according to ABS housing finance data.

Fixed loans of two years' duration or more accounted for just 10.2% of all owner-occupier lending in June, well down from 12.3% of loans in May.

Fixed-rate mortgages reached a recent peak of 14.6% of owner-occupier loans in March, according to the ABS, and were also high at 14% in April, but have declined since in line with the RBA cutting the cash rates in May and June with expectations of at least one more rate cut this year.

The average size of a fixed-rate loan was $289,500, according to ABS figures.

According to July figures from mortgage broker AFG (one month ahead of the ABS), fixed-rate loans held steady 16% of all loans processed, as most new borrowers opted to stick with variable rates.

July figures released by Mortgage Choice show a marked drop in demand for fixed-rate loans from 18% to 15% as demand for variable-rate home loans reached an 11- month high due to speculation of another rate cut in coming months.

Click here for the current (as of August 7) fixed and variable rate offerings in the market.

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