Fixed-rate mortgages currently account for around one in four loans (22%) written by Mortgage Choice brokers and could rise even higher following Australia’s biggest mortgage lender, the Commonwealth Bank, cutting fixed interest rates twice in May.
However, demand for fixed-rate loans is still well below the record levels written in December 2007 (36%) and February 2008 (37%), according to data prepared by Mortgage Choice for Property Observer.
The rush to take out fixed-rate mortgages over this period burned many fixed-rate borrowers who took the three-year fixed products, as the RBA rapidly reduced the cash rate in response to the GFC.
The RBA cut the cash rate from 7.25% in August 2008 to 3% by April 2009.
Borrowers who took out a three-year fixed-rate loan in August 2008 would only have been able to refinance into a cheaper product late last year – unless they were willing to pay early exit fees – in some cases, thousands of dollars.
“The cash rate continued to rise during early February 2008, while fixed-rate demand began tapering off as the impact of the GFC moved closer to home,” explains Mortgage Choice spokeswoman Belinda Williamson.
“In the years since we have not seen fixed-rate demand return to the pre-GFC levels. The closest it has come was in March 2012, when fixed-rate demand reached 26%.”
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