Home Shoppers Favour Fixed Interest Rates
Enquiry for fixed interest rate home loans has reached a post-GFC high as lenders drop rates on both one and two year products, says leading mortgage broker Loan Market.
Loan Market director Mark De Martino said that June enquiry for fixed rate products represented 40 per cent of monthly enquiries, which was a 2013 record, and was a result of fixed rates reaching lows not seen in several years.
“We’re approaching a point where fixed rate products may be first consideration for homeowners. Over the past year, consumers who have fixed their interest rates have enjoyed paying rates that are roughly 100 basis points lower than those on variable rates,” Mr De Martino said .
“Those locking in their interest rates have been enjoying both the security of knowing their repayments won’t change and also paying less than those on variable rates,” he said.
Mr De Martino said that while current interest rates were an obvious factor in choosing whether or not to go down the fix or variable route, but it was crucial for homeowners to assess how future rate movements would impact their budgets.
“One of reasons fixed rates are so popular is that most homeowners do not expect variable rates to average the present one and two year fixed rate terms rates over the same period. While the RBA is forecasted to drop rates again, its unlikely in borrowers minds to be a to be a big enough drop to close the gap between fixed and variable home loans.”
Mr De Martino said that what was likely to close the gap was lenders becoming more competitive with variable rate pricing.
“Lenders have been making lots of noise that the cost-of-funds pressure that kept them from moving rates in synch with the RBA have eased. These funding improvements are paving the way for lenders to drop their variable rate prices, regardless of RBA rate movement, in a bid to gain market share,” he said.