Discounts Boost Interest in Fixed Rates

Borrowers have shown strong interest in fixed rate home loans following a renewed wave of discounting from lenders, according to a national survey by leading mortgage broker Loan Market.

A survey of the company’s mortgage brokers which asked ‘With some lenders reporting fixed rates at a 5-year low, do you expect a rise in applications?’ found almost 80 per cent of respondents anticipate an increase.

Loan Market Corporate Spokesman Paul Smith said 36 per cent of the 193 brokers surveyed expect a moderate five to 10 per cent increase in applications while 15 per cent believe there will be significant rise of more than 10 per cent.

Mr Smith said 28 per cent of brokers see a slight increase of up to five per cent while 21 per cent don’t expect any increase in applications.

“Despite the prospect of the Reserve Bank of Australia (RBA) lowering official rates again, borrowers are drawn to fixed rates with some at their lowest level in five years,” he said.

“There are some very competitive fixed rate offerings in the market, including some which are well below the bank’s standard variable rate.”

Mr Smith said predictions of the RBA lowering the official cash rate from the current level of 3.5 per cent before the end of the year hasn’t reduced the enthusiasm for fixed rates.

He said a large number of Australians committed to fixed rates just before the last GFC in 2008 and then watched as the RBA reduced the cash rate to a near record low of 3.0 per cent.

“Borrowers need to ensure they are locking into a fixed rate for the right reasons, some of which includes certainty of repayment and peace of mind rather than as a speculative play on where rates are going to move,” he said.

“A mortgage broker is best placed to offer guidance on the pros and cons of fixed versus variable, or splitting your loan between a fixed and variable product.”

Survey Results:

With some lenders reporting fixed rates at a 5-year low, do you expect a rise in applications?’

a) Slight 0-5% rise                                     28%

b) Moderate 5-10% increase                36%

c) Significant +10% increase                15%

d) No rise                                                     21%