Fixed rate mortgage demand stages comeback

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Fixed rate home loans attracted more attention form borrowers over November, with demand bouncing back from the four-year low it reached in October.

According to national home loan approval data from Mortgage Choice, demand increased by nearly 4% over November, with fixed rate loans accounting for 17.39% of all mortgages written over the month.

In October, fixed rate loans only accounted for 13.88% of loans written in the month.

Mortgage Choice chief executive John Flavell said the increase came as no surprise and was likely driven by a larger proportion of first home buyers looking to lock in a low rate.

“At the end of October, the majority of Australia’s lenders lifted the interest rates on their suite of variable home loan rate products. The interest rate increases were made outside of any movements by the Reserve Bank of Australia, which sent shockwaves through existing and potential property buyers,” Flavell said.

“As a result of those rate hikes, an increasing number of new buyers are looking to fix at least part of their mortgage as they seek out security and surety around their mortgage repayments,” he said.

While the RBA left the official cash rate on hold at their December board meeting last week, Flavell believes there is every possibility of more independent rate rises to come. As a result, fixed rate demand is likely to continue to increase.

“Looking ahead, I would expect to see greater demand for fixed rate home loan products,” he said.

“Australia’s lenders made it clear in October when they raised their rates that additional rate hikes could be on the cards. In order to avoid any future rate hikes and obtain some surety around their mortgage repayments, I believe we will see more Australians locking into a fixed rate home loan.”

Across Australia, New South Wales was home to the highest level of demand for fixed rate loans in November at 25.9%, followed by Western Australia and Queensland at 16.81% and 15.83% respectively.

Fixed rate demand was at its lowest in Victoria and South Australia at 8.89% and 12.37% respectively.

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