Borrowers still hold on to fixed-rate loans

By Kay Rivera

Borrowers across the nation continue to prefer fixed-rate loans.

Borrowers across the nation continue to prefer fixed-rate loans, according to a new report from Mortgage Choice.

The company’s latest national home-loan approval data showed that the demand for fixed-rate home loans rose over the month, making more than 24% of all loans written throughout October this year. This marked an increase of over 3% on the 12-month average.

Mortgage Choice CEO Susan Mitchell identified rising variable interest rate as one of the factors that drove the current trend.

“Rising variable interest rates would be worrying borrowers across the country who now seem to be making the switch to a fixed-rate loan,” she said. “These borrowers, who may be concerned about rising interest rates, would be looking to secure repayment certainty in what seems like an uncertain period for home-loan interest rates. For this reason, I cannot stress enough how important it is for borrowers who have not had their home loan reviewed in the last 12 months to do so as soon as possible. Complacency could be preventing them from saving money on their repayments each month – and potentially paying down their loan quicker. An appointment to get a home-loan health check could take as little as an hour.”

Mortgage Choice further disclosed that borrowers in New South Wales were most likely to fix their interest rate.  Thirty percent of this group opted for a fixed-rate home loan, tracking higher by almost 4% from the previous month.

South Australia came second, with over 27% of borrowers choosing a fixed-rate home loan.  Twenty-three percent of borrowers in Queensland did the same.

Finally, Victorians were the least likely to fix the interest rate on their home loans, with 15.63% opting to fix.

The results were likely driven by the recent out-of-cycle rate hikes on home-loan products. These hikes were driven by a rise in lenders’ wholesale funding costs and a heavily scrutinised banking sector.

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