Demand for fixed rate products continues to soar despite the Reserve Bank’s decision to cut the official cash rate in both November and December.
According to new data from Mortgage Choice, fixed rate loans accounted for 24 per cent of all new home loan approvals during December 2011, up from 21 per cent in November and well above the 12-month average of 15 per cent.
Demand for this loan type has risen for seven consecutive months, increasing 13 percentage points since May 2011.
“Consecutive cash rate cuts in November and December 2011 have not swayed Australian borrowers’ desire for fixed rate loans,” Mortgage Choice spokesperson Belinda Williamson said
“It is possible borrowers’ need for certainty around their home loan repayments, coupled with the affordability of fixed rate loans are the driving forces behind demand for this loan type.
“During December fixed rates were significantly lower than variable rates, in some cases the difference was one percentage point or more.
“Our loan data shows fixed rates are now more in demand than they have been in over three and a half years at the expense of variable rates, which have lost popularity among new borrowers.
“Customer demand for variable rate loans fell from 79 per cent to 76 per cent, well down on the 12-month average of 85 per cent. The most popular variable rate home loan with new borrowers, ongoing discount rate loans, slipped from 44 per cent to 41 per cent, well above the 12-month average of 35 per cent.”