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Fixed-rate home loan demand climbed slightly higher over May, according to new research by Mortgage Choice.
The group’s latest national home loan approval data found fixed-rate home loans made up 18.17 per cent of all loans written in May, up from 17.91 per cent in April.
Mortgage Choice chief executive John Flavell said demand for fixed-rate products hasn’t been this high since the beginning of the year.
“Since the Reserve Bank of Australia cut the official cash rate to the new historic low of two per cent at its May board meeting, speculation has started to mount that we are now at the bottom of the rate cycle,” he said.
“Following last month’s rate cut, the domestic economy has started to show signs of improvement. Consumer sentiment improved dramatically, while business conditions retraced some of the gains reported in March.”
Mr Flavell noted the sudden improvement in fixed-rate demand suggests the RBA’s May rate cut had a positive impact on the local economy and, as a result, there is no immediate reason for the board to cut the cash rate again.
“The longer the Reserve Bank avoids cutting rates, the more likely we will see borrowers locking themselves into a fixed-rate product as they look to take advantage of the historically low rate environment,” he said.
The data showed variable home loan rates, specifically ongoing discount mortgages, continue to be the most popular product amongst borrowers, accounting for 46.29 per cent of all loans written – up from 43.96 per cent the month prior.
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