Fixed rate mortgages are back in business, with demand rising in June to an 11-month high
Mortgage Choice senior corporate affairs manager Kristy Sheppard comments that fixed rate loans rose a share of total loans to to 7.6 per cent in June, while variable rate loans still made up 86 per cent of loan approvals.
Home owners seem to be opting for fixed rate mortgage products due to the uncertain economic future. The trend has been rising slowly but surely for several months.
"Despite rising interest rates on fixed-term home loans and talk of variable rates staying low for many months yet, demand for fixing has increased over three consecutive months now," Ms Sheppard said.
Ms Sheppard also comments that although just eight per cent of home loan approvals over all were for fixed rate loans, the trend is moving upwards rather than downwards.
While variable rate loans remain the most popular, due to their flexibility, it was the highest level of fixed-rate loans since July 2008, and above the 12-month average of 4.39 per cent. The data comes from the Australian Bureau of Statistics.
Mortgage Choice figures show 46.5 per cent of loan approvals in June were for basic variables, down from 48.8 per cent in May, but still above the 12-month average of 42 per cent.
Fixed rate mortgages may become more popular as banks may still lift rates, according to Loan Market Group.
Many home owners face the dilemma of whether to fix or not, and some opt for a split mortgage where part of the loan is fixed and the other part remains on a variable rate. This can offer some peace of mind while still allowing for some flexibility.
Home owners are urged to compare a variety of loans before choosing which one is right for them and to consider the short term and long term benefits of opting for a fixed rate loan.
Variable rates often change in a different way to fixed rates and by the time variable rates reach their lowest levels, the best opportunity to fix may have already passed.
Variable rate home loans remain the most popular form of mortgage in Australia with borrowers choosing from a standard loan, with a generous serve of flexibility and a competitive rate, or a basic loan which offers a lower rate but less features.
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