Fixed rate home loans losing popularity
FIXED rate demand has hit its lowest level in 22 months, new data has revealed.
According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for just 22.29% of all loans written in December - down significantly from the 26.98% recorded the month before.
Mortgage Choice spokeswoman Jessica Darnbrough said with speculation mounting that the Reserve Bank of Australia could potentially cut the cash rate again in the coming months, it is not surprising to see an increasing number of borrowers opting for a variable rate home loan.
"At the beginning of December last year, speculation was rife that the Reserve Bank of Australia could cut the cash rate throughout 2015," Ms Darnbrough said.
"Ongoing weakness in the Australian and global economy has encouraged some analysts to change their cash rate forecasts to include up to two further rate cuts.
"While future cash rate cuts are purely speculation at the moment, it would seem the chatter has been enough to encourage more home buyers to take out a variable rate mortgage."
Ms Darnbrough said if rates were cut again, borrowers with a variable rate mortgage may benefit.
Across the country, variable rate home loans were most popular in Victoria, with this type of product accounting for 85.79% of all home loans written last month. South Australia and Western Australia were not far behind, with variable rate products accounting for 82.81% and 82.11% respectively.
Variable rate products were least popular in New South Wales, with this type of mortgage accounting for 70.61% of all loans written.
By comparison, fixed rates remained very popular in the state, accounting for almost 30% of all loans written.
Looking ahead, Ms Darnbrough said regardless of whether borrowers opt for a fixed rate mortgage or a variable rate home loan, they will definitely be able to secure a competitive rate.
"Australia's lenders are offering some very sharply priced products at the moment, so regardless of what type of home loan product you eventually decide upon, now is a good time to be a home buyer," she said.