Fixed rate demand on the rise

Fixed rate demand on the rise

Posted on Thursday, March 01 2012 at 5:27 PM

Following the out-of-cycle rate rise by banks last month, more new borrowers chose fixed rate loans, according to the Australian Finance Group (AFG) Mortgage Index.

AFG reported that more new borrowers than ever before – 23.2 per cent – chose to fix rates, surpassing the previous 20.4 per cent for fixed rate loans recorded in October last year, and just 6.6 per cent in February 2011.

Also reported in the AFG Mortgage Index was the record high average new home loan in Australia at $400,000 last month, up from $385,000 in January and $382,000 in February 2011.

New South Wales led the nation with the highest average new home loan for February at $471,000, while Western Australia followed with an average of $421,000 and Victoria took third place with $409,000.

AFG general manager of sales and operations Mark Hewitt said the dynamics of the home loan market are changing in many ways, including the return of a “steady stream” of first homebuyers over the past six months.

Also changing is the Big Four lenders’ dominance in the mortgage market, with more borrowers shopping around for the best fixed-rate deal, possibly in reaction to the out-of-cycle behaviour of the major lenders last month and borrowers’ concerns about the future direction of interest rates, said Hewitt.

The major lenders’ market share dropped from 79 per cent in January down to 76.1 per cent in February, Hewitt said.

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