AAP

Borrowers baulk at fixed rate loans

Wednesday July 23, 05:59 PM

The demand for fixed rate home loans fell sharply in June as borrowers don't want to be locked into high interest rates that may begin to ease again, a new study finds.

Only 13 per cent of all mortgage approvals were for fixed rate home loans in June, down from a high of 38 per cent in February, Mortgage Choice housing loan approval data revealed.

Mortgage Choice corporate affairs manager Warren O'Rourke said demand for fixed rate loans fell had fallen dramatically and the June figure was down from 18 per cent in May and much lower than the 12-month average of 29 per cent.

"There is no doubt that the higher pricing of fixed rates weighed heavily against demand, Mr O'Rourke said in a statement.

"A corresponding growth in variable loan products suggests that some borrowers are either chasing the discounts on variable rate products or have the view that rates are near the top of the current interest rate cycle.

"Either way, fixed is not in vogue at the moment."

Western Australia bucked the trend by increasing its percentage of fixed mortgages from 15 per cent in May to 19 per cent of the total in June.

"In the case of Western Australia, there appears to be an appetite for fixed rates driven by a higher demand for investment properties while Victoria has really fallen out of love with fixed rates, with (the category comprising) only 10 per cent of all approvals," Mr O'Rourke said.

The proportion of standard variable rate home loans increased to 51 per cent of all loan approvals in June and compares with the 12-month average of 41 per cent.

This proportional increase occurred despite lenders raising rates independently in addition to the official rate rises by the Reserve Bank of Australia.

The survey found that demand for variable rate loans was driven by the discounts offered by many lenders when the loan was $150,000 or more.

The proportion of basic variable loans rose to 25 per cent of all approvals, up from the 12-month average of 21 per cent.

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