Borrowers are flocking to fixed-rate home loans, Australia'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 Australian Finance Group said on Tuesday. It was the highest share of fixed-rate loans the broker has seen in the 10 years it has been compiling its mortgage index.
Fixed-rate loans - which reflect market expectations on interest rates - have fallen below 5 per cent for two-year products, lower than in the global financial crisis.
With banks promoting fixed-rate loans in the hope of encouraging borrowing, AFG says the share of new borrowers fixing their mortgage has nearly doubled since January, when it was 16.3 per cent.
"We have seen an unprecedented surge of borrowers wanting to lock in rates," said Mark Hewitt, AFG's general manager of sales and operations. "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."
Market economists are debating whether the Reserve Bank will cut the cash rate this year.
Investors have scaled back their expectations for further interest rate cuts but the market is still betting there is a good chance of another cut over the next year.