Shift in home loan preferences following out-of-cycle interest rate hikes
Demand for fixed rate home loans surged over the month, accounting for almost 24 per cent of all loans written throughout September 2018, according to Mortgage Choice’s national home loan approval data. This is a monthly increase of over 6 per cent and the highest level since December 2017.
CEO Susan Mitchell said that the shift in borrower demand was largely anticipated given the recent changes in the lending landscape.
“September’s data is unsurprising when you consider the recent rate hikes to variable rate home loan products announced by three of the four major banks. This would no doubt be encouraging more borrowers to fix,” the CEO said.
“History has shown that when the majors lift their rates, smaller lenders are quick to offer competitive pricing on their own products in order to attract borrowers in search of a better deal. However, we have seen limited market movement due to a combination of factors such as the regulatory environment and increasing wholesale funding costs, which would no doubt be affecting smaller lenders.”
Ms Mitchell said that other shifts were also evident.
“Institutions across the country have become more selective about the customers they lend to, vying for borrowers in a healthy financial position. Indeed, lenders are seeking high-quality borrowers who present low risk.”
Ms Mitchell said that when mortgage interest rates are on the rise, borrowers are more likely to consider fixing, either in part or all of their home loan.
The data found that borrowers in Queensland were the most likely to choose a fixed rate mortgage, with 26.47 per cent of borrowers choosing this type of home loan product.
This was followed by New South Wales where 26.24 per cent of borrowers chose to fix.
Victoria has seen the lowest level of fixed rate demand for eight consecutive months. However, demand for this type of product rose to almost 17 per cent in September, a monthly increase of almost 4 per cent.