Uncertainty over interest rates movements in the coming months has prompted borrowers to lock into fixed rate mortgages.
Mortgage Choice revealed 12.3% of all approvals in June were fixed rate loans – the highest level in five months.
"Perhaps the constant speculation about interest rate rises in the latter half of 2011 and beyond convinced a higher number of borrowers to simply lock in their rate rather than feel their stomach churn with each piece of speculation," said spokesperson Kristy Sheppard.
BIS Shrapnel recently predicted mortgage holders could be paying up to 2% more on their home loan by Christmas 2013.
According to senior manager Angie Zigomanis, a strengthening economy, record low employment and increasing net migration indicate Australia will experience a real estate recovery that could push standard variable rates up to 9.5%.
Banks have fuelled the popularity of fixed rate products by introducing some competitive deals.
Westpac cut its fixed rates on Home and Investment Property Loans for two to 12 years – starting from 7.19% p.a. The two- and three-year fixed rate products dropped by 20bps, while the four- to 12-year products were cut by 10 bps.
Meanwhile, ING Direct just announced it is reducing shorter term fixed rates to a market-leading 6.79% for one-year and 6.99% for both two- and three-year fixed rates.
“We’re seeing a healthy appetite amongst borrowers for shorter term fixed rate loans, particularly given they sit below most variable rates on offer,” said ING Direct’s Head of Broker Sales Mark Woolnough.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan