Surge in buyers locking in mortgage rates
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.
Frequently Asked Questions about this Article…
Borrowers are locking in fixed-rate home loans to take advantage of record-low fixed rates and because many commentators believe the interest-rate cycle is at the bottom. The article says banks are also promoting fixed rates, which has encouraged more borrowers to fix their mortgages.
Almost 30% of borrowers who took out a new home loan last month chose a fixed-rate loan, according to mortgage broker Australian Finance Group (AFG). That's the highest share AFG has recorded in the 10 years it has compiled its mortgage index and represents nearly a doubling from 16.3% in January.
Two-year fixed-rate loan products have fallen below 5%, the article notes, which is even lower than fixed rates during the global financial crisis.
Fixed-rate loans reflect market expectations on future interest rates, meaning the price of fixed rates signals what the market thinks will happen to official rates over the fixed period.
Yes. The article says banks are promoting fixed-rate loans in the hope of encouraging borrowing, and that promotion has been a factor in the surge of borrowers choosing to fix their rates.
Australian Finance Group (AFG) reported the surge. Mark Hewitt, AFG's general manager of sales and operations, called it an 'unprecedented surge of borrowers wanting to lock in rates' and said many borrowers have responded by fixing rates below 5% that have been widely on offer.
Market economists are debating whether the Reserve Bank will cut the cash rate this year. The article states investors have scaled back expectations for further cuts, but the market still sees a good chance of another cut over the next year.
For everyday homebuyers and property investors, the surge in fixed-rate borrowing signals that many people are prioritising certainty in mortgage costs while fixed rates are at historic lows. It also shows how expectations about future Reserve Bank moves are shaping borrowing decisions today.
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