Home buyers stream into fixed-term rates
- From: The Australian
- October 04, 2011
More home buyers are moving into fixed-rate housing loans Source: HWT Image Library
Source: The Australian
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HOME buyers rushed to lock in lower fixed-term interest rates last month amid increasing uncertainty about the economy.
A mortgage index published by broker AFG showed that 16.6 per cent of all new home loans processed in September were on fixed-rate loans compared with 9.4 per cent in August. The last time fixed-rate home loans were so popular was back in April 2008, when 18.4 per cent of all loans taken up were on fixed rates.The switch to fixed rates is likely to continue, with major lending institutions cutting their offerings by up to 60 basis points on terms of up to five years, in the past two months.
AFG also says there has been a strong return of first-home buyers in NSW and Western Australia last month.
"In September we have seen very aggressive competition, with lenders cutting their fixed-rate offers," AFG general manager Mark Hewitt said. "The combination of more realistic property prices, attractive financing options and the lack of confidence in the sharemarket seems to be coaxing first-home buyers and investors back into some markets."
The growing popularity of fixed-rate home loans resulted in a fall in the number of borrowers choosing a standard variable rate.
In September, 60.9 per cent of borrowers picked a standard variable home loan -- down from 63.2 per cent the previous month.
In NSW, first-home buyers accounted for 18.9 per cent of the market in September, in WA 17.4 per cent and Queensland 15.8 per cent. First-home buyers were relatively more subdued in Victoria, comprising only 13.3 per cent, and South Australia (10 per cent).
Commonwealth Bank of Australia chief economist Craig James said cuts in fixed-rate home loans, combined with falling house prices and more realistic expectations from vendors, had sparked greater interest in the residential market by first-home buyers.
"Many first-home buyers need certainty on what mortgages they will be paying over the next few years and have opted for fixed-home loans," Mr James said.
"With eight consecutive falls in housing prices, coupled with more realistic vendors, first-home buyers feel they can extract more bargains if they enter the housing market now. Investors, however, are still keeping their money in cash because of the global uncertainty. Right now, cash is king."
AFG says non-major lenders have made greater inroads in the housing loan market among first-home buyers, with 29.3 per cent of buyers opting to borrow from a non-major lender -- up from 22.2 per cent in August.
Non-bank lenders have also grown in popularity among those seeking to refinance their loans, with 21.4 per cent choosing non-major lenders -- up from 19.7 per cent the previous month.
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