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A spate of attractive variable rate promotions from Australia’s largest lenders has resulted in reduced appetite for fixed rate mortgages.
According to new data from Mortgage Choice, demand for fixed rate products fell last month – the first fall since July 2010.
Just 10.7 per cent of the home loans approved for Mortgage Choice customers in February had a fixed interest rate, significantly down on the 15.3 per cent recorded in January.
Mortgage Choice spokesperson Kristy Sheppard said that the appetite for fixed interest rates is now at its lowest since October 2010, where it sat at 8 per cent.
“Last month’s fall in demand coincides with the start of the ‘lender war’ for home loan volume growth,” she said.
“It appears new borrowers were lapping up the newly introduced deals on offer in February, taking advantage of lenders’ various incentives as they compete to outstrip each other of vital market share.
“A move away from fixed interest rates may also signal an uptick in positive consumer sentiment towards the economic outlook. The next cash rate rise is now tipped for mid to late this year,” she said.
“Ongoing discount loans - where the interest rate is discounted over the entire loan term usually in return for an annual fee - experienced a 2.1 percentage point drop in popularity. This occurred as borrowers, smitten by the range of special offers, increased their demand for standard and basic variable rate loans, by 3.9 and 1.9 percentage points respectively.”