Borrowers shun fixed loans

Borrowers shun fixed loans

Posted on Monday, August 11 2014 at 10:58 AM

Homeowners and investors are shying away from fixing home loans, according to the latest housing finance data released by the Australian Bureau of Statistics.

The proportion of borrowers
who fixed their home loan in June 2014 was at the lowest level in 17 months.

There were just 7448 fixed
home loans financed in June, (14.26 per cent of all loans), which is 942 fewer
fixed home loans financed, or 11 per cent lower, than the previous month.

Money expert at comparison
website Michelle Hutchinson says lenders need to do more if they
want to attract borrowers to fix.

“It’s no surprise that fewer
borrowers are fixing their home loans, because fixed home loans aren’t as
competitive as variable rate home loan deals,” she says.

“Despite many lenders,
including the major banks, dropping some of their fixed home loans in recent
weeks, they have a long way to go before they’re lower than variable rates.
Many lenders have room to be more competitive in the fixed rate home loan market.

“For instance, the lowest
variable home loan rate is 4.54 per cent by – 0.39 percentage
points lower than the cheapest five-year fixed rate of 4.93 per cent by UBank.
Even though this is the lowest five-year fixed rate we’ve seen, it would still
cost an extra $71 per month in repayments for a $300,000 home loan over 30

However, Hutchinson adds
leading economists expect interest rates to start rising next year, if not

“This could mean that we
won’t see fixed rates fall much further,” she says.

“So for borrowers who are
worried about the higher costs when interest rates rise, it’s worth comparing
fixed home loans for the security that repayments won’t change for the fixed
period, even though they may not be as competitive as variable home loan


Article source: