Record fixed-rate lows lure home buyers
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.
Frequently Asked Questions about this Article…
Borrowers are choosing fixed-rate home loans to lock in historically low mortgage rates. The article says nearly 30% of new borrowers last month picked fixed rates as banks widely offered deals and many commentators believe the interest rate cycle is at or near the bottom.
Almost 30% of borrowers who took out a new home loan last month chose a fixed-rate loan, the highest share in the 10 years AFG has compiled its mortgage index. That surge indicates a significant shift toward fixing mortgage rates among new borrowers.
Fixed-rate loans have fallen below 5% for two-year terms, which the article notes is lower than during the financial crisis. For the popular three-year term, the big four banks are offering fixed-rate mortgages around 5.29%.
Yes. The article reports banks are pushing fixed-rate loans to encourage borrowing, and AFG said the share of new borrowers fixing their mortgage has nearly doubled since January, when it was 16.3%.
According to RateCity spokeswoman Michelle Hutchison, fixed-rate mortgages are no longer falling as fast as a few months ago, but it is premature to say they have bottomed. She said, 'We have not reached that point yet.'
Market economists are debating whether the Reserve Bank will cut the cash rate further this year. Investors have scaled back expectations for near-term cuts, though markets still see a reasonable chance of another cut within the next year.
Yes. The article notes that fixed-rate home loans typically move before the official cash rate, so fixed mortgage pricing can reflect expectations about future Reserve Bank decisions.
AFG’s general manager of sales and operations, Mark Hewitt, described an 'unprecedented surge' of borrowers wanting to lock in rates. He said many commentators believe the interest rate cycle is at the bottom, prompting borrowers to fix rates of less than 5% that have been widely on offer.
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