Lending for fixed rate products has seen an increase in the first three months of the year, according to a report by Australian Finance Group. Out of those borrowing, 17.7 per cent opted for fixed rate products during the March quarter, in comparison to the 11.4 per cent seen during the first quarter of the 2016 financial year. Investor numbers also rose from 31 per cent to 33 per cent of AFG's total volume.
"With sections of the money market making the call of a rate cut in the coming months, there are some very attractive fixed rates available," said Mark Hewitt, General Manager of AFG in Sales and Operations. "With rates being at historical lows, the downside risk of fixing is relatively small, so many borrowers are choosing to lock in now."
Furthermore, there are no guarantees that lenders will not make their own moves outside the Reserve Bank cycle despite the RBA's decision to leave the two per cent cash rate on hold.
"Some are talking about increased funding and regulatory costs and locking the low rates in now is a way borrowers can insulate themselves against any out of cycle increases by the banks," he said.
During the same quarter last year, AFG's overall volume was up by 5.7 per cent, with Victoria leading all states with an increase of 15.7 per cent. This was followed by SA, NSW, and Queensland, which rose by 11.3, 10.5, and7.6 per cent, respectively.
"The average LVR (loan to value ratio) of 68 per cent is the lowest it has been for three years," Hewitt said. "This means home buyers are continuing to borrow within their capabilities."
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