Demand for fixed rate loans a "sign of things to come"

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The popularity of fixed rate loans is a sign of things to come according to the head of major motgage broking franchise.

Figures released yesterday by Mortgage Choice have revealed that fixed rate loans increased during March, accounting for nearly a quarter of all loans written during the month.

According to Mortgage Choice, 23.15% of all loans written throughout the month of March were fixed rate loans, up by 0.87% compared to February’s 22.28%.

Mortgage Choice chief executive officer John Flavell said the increase came as little surprise.

I wasn’t surprised to see fixed rate demand rise over the month of March and I believe it is a sign of things to come,” Flavell said.

“Variable rate loans will no doubt remain the most popular product with borrowers for years to come as it allows them to take advantage of rate reductions when they occur. That said, given that the interest rate market is incredibly volatile, I would expect to see more borrowers looking to lock in at least part of their mortgage,” he said.

Part of that volatility is the result of ne regulatorty measures faced by lenders, which Flavell said could result in interest rate rises.

“Last week, it was announced that 15 of Australia’s largest banks will soon be forced to meet new rules that will limit their reliance on short-term wholesale funding,” he said.
 
“These new rules could force bank funding costs higher. If this happens, we may see some of Australia’s lenders passing on these higher costs to their customers by way of higher rates. As a result, I wouldn’t be surprised to see an increasing number of borrowers looking to fix their mortgage to avoid any potential rate increases.”

Across Australia, fixed rate demand was at its highest in Western Australia, accounting for 26.91% of all home loans written throughout March, followed by NSW at 26.4%.

Fixed rate demand was at its lowest in Victoria, accounting for just 12.70% of all home loans written in March.
 

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