Fixed rates are back in vogue, with new data revealing borrowers continue to flock to this type of product.
According to research from Mortgage Choice, fixed rates accounted for 22.37 per cent of all loans written in November – slightly higher than the 21.72 per cent recorded in October.
This is the fourth consecutive month of growth for fixed rates, company spokesperson Belinda Williamson said.
“Our data shows that more than one in every five new borrowers is not phased by the possibility of further variable rate cuts as early as this week, having locked in to a fixed rate loan with repayment certainty for the next year or more,” she said.
“With fixed rates at their lowest level since 2009, there are bargains on offer to both new and existing borrowers. Lenders continue to tweak their fixed rate loan pricing based on their desire for business, while factoring in their funding costs and the level of demand from borrowers.
“When investigating the option to fix part or all of your home loan’s interest rate, be sure to weigh up your options carefully as fixed rate loans have both pros and cons. Remember, the interest rate is not the only factor to consider; also compare any initial, recurring and break costs, the ability to make extra repayments and redraw, lender service and how long the loan will take to be approved.”
While many fixed rate loans are currently priced lower than variable rates, a majority of borrowers are choosing the latter.
“Despite a marginal dip in demand in November by 0.65 percentage points to 77.63 per cent, variable interest rate loans remain the top choice for Australian mortgage holders. Ongoing discount rate loans – where the rate is negotiated to a reduced amount over the loan term, usually in return for an annual fee – remained the loan of choice, accounting for 41 per cent of all new home loan approvals,” Ms Wlliamson said.