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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Fixed Rate Mortgages Gain Momentum

18 June 2013

New data collated by the ABS indicates a major shift towards consumers opting for a fixed rate on their home loans rather than a variable. ABS figures in April indicate that 20.6 per cent of new loans issued were fixed reflecting the highest share in fixed-rate mortgages in five years. This is the highest proportion since March 2008, when the Reserve Bank pushed the official rate up to 7.25 per cent with many economists then predicting even further rate increases.

The Australian arm of HSBC last week cut its two-year fixed rate for new customer loans to 4.59 per cent. It also cut rates on three-year fixed loans to 4.79 per cent and five-year products to 5.09 per cent. ANZ, NAB, and Commonwealth Bank all have a two-year rate set at 4.99 per cent, while Westpac is offering 5.09 per cent.

Alice Del Vecchio head of mortgages at Australia’s HSBC, has said the bank,“viewed Australia as a strong growth opportunity, and its fixed rates also reflected the calming on funding markets.”

With debate continuing among commentators whether variable rates have hit a bottom, Del Vecchio has said, “a growing number of borrowers choosing to fix part of their mortgage and keep part of it on a fixed-rate loan. We’re seeing a lot of customers now taking both,’’ she said. ‘‘It’s a unique environment where customers are literally hedging their bets to a degree.’’

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