Buyers turn to fixed-rate loans

Fixed interest rates have started to climb in recent months, but so too has the demand for fixed-rate home loans from Australian borrowers, according to Mortgage Choice lending figures.

Seven per cent of all Mortgage Choice loan approvals were for fixed-rate loans in May 2009, which was the third consecutive month to see increased demand for fixed products. Mortgage Choice senior corporate affairs manager Kristy Sheppard says May’s take-up of fixed-rate loans is the highest seen since July 2008, but it’s still a long way down from the peak of 38 per cent in November 2007.

“It’s interesting to see a number of new borrowers locking in their rate despite the fact that fixed loans are priced higher than many variable loans at the moment,” Sheppard says.

“However, we’re experiencing interest rates that are historically very low, so it’ll make sense for some to simply ‘set and forget’.”

Basic variable home loans remained popular in May, representing 49 per cent of all new loans taken out.

“Basic variable loans have been the most popular loan type for five months now, after overtaking standard variable for the first time on our records in January 2009,” Sheppard says.

“This demonstrates that most Australians are comfortable with the interest rate situation, for now at least, and probably expect them to stay low for quite some time.”

Uptake of line of credit loans – generally popular with property investors – increased slightly in May to 5 per cent of all approvals, but still under the 12-month average of 8 per cent.