With interest rates falling, demand for fixed-rate home loans fell in June, accounting for 21% of all home loans written. According to new data from Mortgage Choice, this is the lowest level in almost eight years. The decrease in demand for fixed loans is not surprising, with interest rate reductions following two cash rate cuts from the Reserve Bank. A snapshot of recent loan approval data suggests borrower preference for variable loans is growing.
Mortgage Choice Chief Executive Officer Susan Mitchell says: “We can see a clear shift towards variable rate loans. In fact, this type of loan product accounted for 86.5% of home loan applications and only 13.5% of customers chose to fix.”
Mortgage broker Louise Lucas of The Property Education Company says that while interest rates are trending lower, there’s still a case to be made for fixing, particularly for investors.
“We are getting really good interest rates for fixed loans, sometimes 30 or 40 basis points lower than the variable rates on offer,” Lucas says. “You can get below 3.5% interest-only fixed for two years. When you have a fixed-rate, you have some certainty and you know what your repayments will be.”