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Fixed rates not so popular

By webmaster
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Despite attempts by lenders to attract borrowers, fixed rates continue to make up only a small portion of all loans financed.

According to finance research house RFi, the proportion of fixed loans grew just 0.6 points in July to 4.0 per cent.

The proportion of fixed rate loans to all loans refinanced has fallen significantly from a high of 23.9 per cent in February 2008, when the official cash rate was set at 7.25 per cent.

Over the last two years the proportion of fixed loans has fallen by 54.55 per cent from July 2008 to July 2010.

RFI director Alan Shields told Smart Property Investment that over the past few years, there has been a growing trend among borrowers to veer towards variable over fixed rate mortgages.

Mr Shields said as much as certainty is a nice thing for borrowers, many are reluctant to lock themselves into something.

“Our quarterly consumer sentiment survey has shown a growing trend among borrowers to opt for variable products over fixed rate products,” he said.

“Fixed rate products have, generally speaking, been more expensive in the past which can influence a borrower’s decision. While many banks have revised their fixed rate pricing down in recent weeks, it is probably not enough to encourage borrowers to fix. Many are happy to ride out the variable wave and see where interest rates go.”

But with many predicting interest rates to rise over the coming quarter, have borrowers that are looking to fix missed the boat?

Mr Shields thinks not.

“I would be hesitant to say borrowers have missed the boat. Though, that said, the best time to fix a mortgage is when the banks are just starting to change their standard variable pricing.”

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