Record fixed-rate lows lure home buyers
Borrowers are flocking to fixed-rate home loans, the country's biggest mortgage broker says, as buyers look to exploit the lowest fixed rates on record.
Almost 30 per cent of borrowers who took out a new home loan last month chose a fixed-rate loan, broker AFG said on Tuesday. It was the highest share of fixed-rate loans in the 10 years the broker has been compiling its mortgage index.
Fixed-rate loans - which reflect interest rate expectations - have fallen below 5 per cent for two-year terms, lower than during the financial crisis.
With banks pushing fixed-rate loans to encourage borrowing, AFG said the share of new borrowers fixing their mortgage had nearly doubled since January, when it was 16.3 per cent.
"We have seen an unprecedented surge of borrowers wanting to lock in rates," AFG's general manager of sales and operations, Mark Hewitt, said. "With many commentators believing the interest rate cycle is at the bottom, borrowers have responded by fixing rates of less than 5 per cent that have been widely on offer."
It comes as market economists debate whether the Reserve Bank will cut the cash rate further this year.
Investors have sharply scaled back their expectations for further interest rate cuts in recent months, but the market is still betting there is a good chance of another cut in the next year. Fixed-rate home loans typically move before the official rate.
RateCity spokeswoman Michelle Hutchison said fixed-rate mortgages were no longer falling as fast as a few months ago but it was premature to say they had bottomed.
"We have not reached that point yet," Ms Hutchison said.
For the most popular term of three years, all of the big four banks are offering a fixed-rate mortgage with an interest rate of 5.29 per cent.