Borrowers across Australia are still banking on interest rates remaining at near-record lows, with new figures from a major mortgage broking franchise showing the popularity of fixed rate home loans is continuing to fall.
According to Mortgage Choice, fixed rate loans accounted for only 13.88% of all home loans written through October.
That figure is down from the 14.41% of mortgages written during September that were fixed rate loans, which was a then four-year low.
According to Mortgage Choice, the decrease makes October the fourth straight month in which the demand for fixed rate mortgages has fallen, a trend that is unlikely to change according to one mortgage broker.
“We have seen some clients recently come to us looking to fix, but I don’t think fixed rates are going to make a real comeback anytime soon,” Rebecca Hona, mortgage broker at wHeregroup said.
“I’d say people are thinking, ‘Why should I fix when variable rates are lower than the fixed rates on offer and there’s a chance the RBA could cut the cash rate again which could be passed on to me?’” Hona said.
While it is unlikely banks would pass on the full amount of a RBA cut to the official cash rate, Hona believes borrowers could at least expect be 0.10% to 0.15% better off if the RBA did make a move.
While Hona said the popularity of fixed rate loans may be falling as people take advantage of the lower variable rates on offer, she also said changes to fixed rate lending policies could explain the decrease in demand.
“I think another reason they’ve come off the burner is because of changes to how servicing for fixed rate loans is calculated.
“It used to be that that you could fix your loan for three to five years and that rate would be used to calculate your serviceability for the life of the loan, which was a bit of a loophole people were using. But now with the APRA changes that have come about recently, that’s no longer possible.”
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