Homebuyers are increasingly favouring variable or split loans over fixed rates in the hope that rates will continue to fall, according to data from Aussie.
The number of fixed rate loans taken out by the mortgage broker’s customers fell by almost five per cent in November 2014 when compared to the same time last year, to just 12 per cent of loans. The mortgage broker said customers are increasingly opting for variable or split loans instead.
The trend from fixed rates to variable or split loans was most pronounced in the Northern Territory (nine per cent fall), Victoria (eight per cent fall) and Queensland (six per cent).
Aussie expects this trend will continue into 2015 as speculation rises that the Reserve Bank may lower the cash rate further in the New Year.
Aussie founder and executive chairman John Symond said savvy customers were hedging their bets on interest rates.
“They’re wanting to take advantage of a competitive mortgage market and despite no cash rate changes in 16 months, lenders are continuing their moves toward lower interest rates,” he said.
Mr Symond said customers who want the best of both worlds are splitting their home loan into fixed and variable portions.
“Fixed rates give certainty around repayments, ideal for tight budgets, while also protecting against possible rate rises in the years ahead," he said. "Variable rates give flexibility to take advantage of the current low rates by making additional repayments to pay down their mortgage and the benefit of any further rate drops.”
Mr Symond said the prospect of rate drops, combined with the red-hot competition between lenders for a slice of the “home loan pie”, created a great opportunity for borrowers to secure a highly competitive rate.