Demand for fixed rate mortgages hit almost 11 per cent of all home loans approved in November, the highest level in 29 months, according to the customer data of one mortgage broker.
That was considerably more than the 7.7 per cent recorded in October, and prior to the Reserve Bank jacking up the cash rate in November that triggered large increases averaging 40 basis points in standard variable home loans by the major banks.
”Australia’s hunger for fixed interest rates is well and truly becoming a louder rumble,” said Mortgage Choice’s Kristy Sheppard as she released the findings today.
Demand lifted from a trough of 0.88 per cent in January 2010 to 10.9 per cent in November.
The elevated pricing of most fixed rates had not deterred one in nine new borrowers from fixing the rate on part or all of their home loan.
”The value of peace of mind over repayment level should not be underestimated,” Ms Sheppard said.
The popularity of fixed rate home loans, that offer a set term of steady minimum repayments – usually three years – highlight the increasing caution of borrowers in the face of higher interest rates and living costs.
Another mortgage broker, Loan Market, also has faced a rush of enquiries from homeowners looking to downsize their properties to reduce the size of their home loan,
”Our call centre rarely receive downsizing inquiries in any given week of the year,” chief operating officer Dean Rushton said. ”So the influx of this type of enquiry indicates mortgage holders are really feeling the impact of last month’s Reserve Bank rate rise.”
The Reserve Bank will hold its monthly board meeting tomorrow, but no economist is expecting a follow-up rate increase.
Mr Rushton said there were some predictions the central bank could lift the cash rate to as much as 6 per cent by the end of 2011 from 4.75 per cent currently, and that had unnerved many mortgage holders.
”By selling up and buying a smaller home and less expensive property, people cane reduce their mortgages and create a comfort zone,” he said.