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Demand for fixed rate home loans has dropped to a seven year low, according to Mortgage Choice.
Data compiled by the brokerage found fixed rates now account for just over 1 per cent of all new home loans.
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Mortgage Choice senior corporate affairs manager Kristy Sheppard said Australians were choosing variable mortgage products over fixed home loans because they are a cheaper option up front.
“Our lender panel’s average basic variable interest rate is around one and a half percentage points lower that for the average three-year fixed rate loan, the most popular fixed loan. This equates to $286 per month extra in repayments for a 25-year, $300,000 loan at 7.7 per cent versus 6.2 per cent,” Ms Sheppard said.
“When you look at the comparative cost between fixed and floating rates, it’s not at all surprising that almost 99 per cent of our new residential borrowers are choosing variable home loans.
“It appears most new borrowers are looking at the difference between the two loan types and thinking they feel more comfortable paying less and riding the variable rate rollercoaster, despite the almost-certain rate rises coming up this year.”
