Talk of the central bank lifting interest rates within the next year is expected to increase Western Australia's demand for fixed rate loans, which dipped slightly in July, a new Mortgage Choice survey shows.
Talk of the central bank lifting interest rates within the next year is expected to increase Western Australia's demand for fixed rate loans, which dipped slightly in July, a new Mortgage Choice survey shows.
The announcement is below:
The popularity of fixed rate loans in Western Australia has fallen as lenders continue to raise the interest rates on this loan type. According to July data from Mortgage Choice, Australia's largest independently-owned mortgager broker, demand for fixed stood at 5% of all loan approvals, reflecting a drop of two percentage points from the month previous.
Demand for variable loans rose six percentage points over the month to 86%, slightly above the 12-month average of 84%.
Standard variable loans (where eligible customers with a loan of over $150,000 can receive discounts on the interest rate plus other professional package features) continued to lead in terms of popularity, with 52% of loan approvals comparing to 35% for basic variable loans.
WA and Queensland are the only states where standard variable demand tops basic variable.
Mortgage Choice senior corporate affairs manager, Kristy Sheppard said, "It is completely understandable that Australians are wary of fixing their home loan term, given lenders continue to raise fixed rates to a point where they are much higher than variable rates.
"I'm not surprised to see Western Australian demand for fixed drop to 5% in July, from 7% in June. However, this is slightly above the 12-month average of 4%."
"Fixed rates have been increasing for a good three months now, with our 23-lender panel average rate for three-year fixed loans - the most popular term - having reached 6.71%, which compares to an average of 5.49% for basic variable loans. For an average mortgage, the difference in repayments is around $200 per month.
"It goes a long way to explaining why variable loan demand stands historically high at 86%, despite there being talk of cash rate rises within the next six to 12 months. However, with that talk picking up in the last couple of weeks we may see fixed demand pick up once again.
"Delving further into July loan approval data for Western Australia, standard variable demand was much higher than that for all other loan types, rising five percentage points to 51%. This compares to a 12-month average of 44%. Basic variable demand rose two percentage points to 35%, although that was below its 12-month average of 39%."
Uptake of line of credit loans (generally popular with property investors) decreased slightly to 9% of all approvals, comparing to a 12-month average of 13%.