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Mortgage Borrowers Not Switching To Fixed Rates In Large Numbers
Australian mortgage borrowers do not seem to be phased by the Australia’s largest mortgage lender raising its standard variable mortgage rate and there has been no en mass switch into fixed rate mortgages according to a mortgage broker.
At the start of June Commonwealth Bank of Australia increased the interest rate on its variable rate mortgages by 10 basis points citing higher funding costs. The decision was a very controversial one and was met with much criticism.
John Kolenda, executive director with mortgage broker Loan Group said that the company’s brokers had not received a noticeable increase in enquires for fixed rate mortgage rates, despite CBA’s decision.
“The lack of demand to switch to fixed rates indicated the majority of home owners believed they would be better off sticking to variable rates while the economy remained in decline,” Mr. Kolenda said.
Mr. Kolenda added that most economists he has spoken with believe that the Australian central bank the Reserve Bank of Australia (RBA) was likely to cut official interest rates further over the next 12 months. The official interest rate currently stands at 3.0 per cent.
Standard variable rates are roughly 5 per cent, which are their lowest level in half a century.
“The opportunity to lock in a long-term fixed rate in the low five per cent range has probably passed as the major banks have already significantly increased their fixed rates”.
Mr. Kolendra also made the point that many borrowers may have misgivings about switching from variable to fixed rates after having been caught out after doing the same thing prior to the economic slowdown and seeing interest rates cut by 425 basis points.
According to the Australian Bureau of Statistics, more than 125,000 people locked into fixed rates of more than eight per cent in the 12 months to August 2008.
“Those people then watched as the RBA reduced the cash rate by more than four per cent in response to the global financial crisis,” he said.
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One Response to “Mortgage Borrowers Not Switching To Fixed Rates In Large Numbers”
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I am finding a lot of people are inquiry about fixing their rates however, they still have this hesitation due to the such diverse difference between the cheapest fixed and best standard variable rate…Fixed rates have run a fair bit of late which has spooked the interest in them…Standard Variable is still very much sort after at present..We will see in 12 months time…