Growing momentum about another cash rate cut has seen demand for fixed rate home loan drop to their lowest level in almost three years.
According to the latest national home loan approval data from Mortgage Choice, fixed rate home loans accounted for 17.41% of all loans written throughout the month of August, down 1.05% from July and the lowest level since January 2013.
“It has been 31 months - or almost three years – since fixed rate demand was this low. Across Australia, fixed rate demand was lowest in Victoria, with this type of product accounting for just 11.66% of all loans written throughout August,” Mortgage Choice CEO John Flavell said.
“Western Australia and South Australia weren’t far behind, with fixed rates accounting for 14.16% and 14.59% of all loans written in both states respectively.”
The Reserve Bank of Australia kept the cash rate on hold at its historical low of 2% when it met this week, however a number of financial commentators are predicting that the central bank will lower the official cash interest rate by the end of the year.
AMP chief economist Shane Oliver also told Fairfax that there was a good chance of a rate cut on Melbourne Cup day.
“On balance, the RBA will be forced to cut interest rates again. The reason is the economy is continuing to run at a very sub-par pace,” he said.
“I think if it’s going to come, it will probably be November.”
However, Flavell says the drop in fixed rate demand was surprising given the current volatility of the home loan market.
“Generally speaking, when the market is volatile and lenders are moving their rates – as they are doing now – fixed rate demand increases, as borrowers look for security and consistency around their mortgage repayments,” he said.
“In recent weeks, many of Australia’s lenders have increased their interest rates across their suite of investment products. Despite this, more borrowers are choosing variable rate home loans over fixed rate mortgages.”
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