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More borrowers enticed to commit to a fixed term: Mortgage Choice

Demand for fixed rate home loans is on the rise as rates hit all-time lows and lenders target borrowers with aggressive discounting.

According to Mortgage Choice’s national home loan approval data, fixed rate loans accounted for 22.47 per cent of all home loans written in May, and 21.81 per cent of all loans written in the past 12 months.

Mortgage Choice Chief Executive Officer Susan Mitchell said the increased demand was hardly surprising in the current market.

“Lenders on our panel have been aggressively discounting fixed rate home loan products, which has been effective in enticing more borrowers to commit to a fixed term,” Ms Mitchell said.

“With rates as low as 3.49 per cent p.a, it’s unsurprising to see an increasing proportion of borrowers choosing to fix.”

The data revealed that fixed rate demand was highest in Queensland, where 26 per cent of borrowers opted for this type of home loan, followed by Western Australia with 25 per cent. Borrowers in Victoria were the least likely to fix, with 15 per cent of borrowers choosing this type of product.

The most popular home loan products in May were ongoing discount Variable Rate loans followed by Basic Variable rates.

Ms Mitchell said now was a good time for borrowers considering fixing part or all of their home loan to act.

“Current fixed-rate loan pricing presents good value by long-term standards,” she said.

“This is good news for borrowers seeking repayment certainty. In particular, for first home buyers who are looking to take advantage of government schemes and record low interest rates to enter the property market for the first time.”

While news of low interest rates is piquing borrower interest, Ms Mitchell said it was equally important that borrowers remember the interest rate isn’t the only component of a home loan.

She advised they look for the right loan product and features for their short and long-term needs.

“It pays to be proactive when it comes to your home loan interest rate, as complacency could stop you from potentially saving thousands each year.

“As we approach the end of the financial year, I also encourage existing borrowers to speak to their mortgage broker to get their home loan reviewed,” Ms Mitchell said.

“I advise borrowers to review their home loan at least once a year to ensure their current loan is still meeting their needs. After all, the number of rate cuts we have seen in the last few weeks alone could mean there are more suitable and more affordable loan products on the market than the one they are currently in.

“Borrowers who are considering switching home loan products should speak to their local mortgage broker to learn what their options are.”

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