Australian Property News

More demand for fixed rates

Posted on Tuesday, September 07 2010 at 4:01 PM

Fixed rate home loan demand rose in August by 0.64 per cent; the first rise in three months, according to Mortgage Choice

Despite the increase, it’s still a fairly unpopular loan type, making up just 2.7 per cent of the company’s August approvals.

Basic variable loans are still the home loan of choice for new borrowers, at 42.6 per cent.

The slight increase in demand for fixed rate loans can really be put down to two factors, says Mortgage Choice spokeswoman Kristy Sheppard.

"Talk of lenders planning to increase mortgage interest rates outside of the Reserve Bank's cash rate cycle has been escalating in the past couple of months and I'm guessing that has had some impact on the decision making process of new home loan customers,” she says.

"Another strong influence would be the relatively small distance between interest rates on a number of fixed and variable home loans.

"The price gap between our lender panel's average three-year fixed interest rate and basic variable rate is a mere 0.28 percentage points. On a 30-year $300,000 principal and interest loan, this is $56 per month. It's been a long time since the difference was this close.”