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Date Published : Friday, August 08, 2008
Consumer demand for fixed-rate home loans has fallen by half since the start of the year, indicating that potential borrowers are holding off for a cut in interest rates, according to reports.
News.com.au says figures from the Australian Bureau of Statistics (ABS) show fixed-rate loans made up 11.7 per cent of new mortgages in June - the lowest market share for this type of product since October 2005.
June's figures show demand for fixed-rate mortgages fell in three consecutive months, despite many of the major banks raising their lending rates for variable loans above the Reserve Bank of Australia's (RBA) base interest rate.
Equities economist Savanth Sebastian of Commonwealth Securities said the latest figures show househunters are risking higher repayments to take out variable rate loans, betting the economic slowdown will see their rates fall below those of fixed-rate products.
"If investors have a significant level of fat in their budgets to cope with variable interest rates they will tend to go for variable loans, given they feel interest rates have peaked," he said.
"If you see the Reserve Bank follow through with rate cuts, that's going to buoy the housing sector and also reduce the amount of people taking out fixed loans."
Earlier this week, the RBA held interest rates at their 12-year high of 7.25 per cent. However, the Bank's committee said the scope for a "less restrictive" monetary policy has increased, prompting many analysts to forecast a rate reduction as early as September.
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