Demand for fixed rate mortgages has risen to its highest level in one year, as borrowers look to 'lock in' ahead of another predicted rate rise.
According to recent data from Mortgage Choice, fixed rate home loans now account for 3.7 per cent of all loans written – the highest level since September 2009.
Mortgage Choice spokesperson Kristy Sheppard said the company’s loan approval figures show new borrowers are becoming more cautious about the interest rate landscape.
“This is the second consecutive monthly growth in demand for this loan type and I’d say that trajectory will continue as we head into an environment of rising variable rates. I do find it interesting that it’s taken so long for this trend to kick off, given all the talk about expected cash rate increases over the next year or so. Of course, fixed term loans are more restrictive and can incur significant break fees so that would be a deterrent, as would the premium you pay to fix,” she said.
Ms Sheppard said the rise in demand for fixed rate and basic variable rate home loans indicates new borrowers are sacrificing greater flexibility for the peace of mind that can come with either guaranteed steady payments or more affordable repayments.