Homebuyers shunning fixed-rate mortgages
April 6, 2009
Home buyers have all but given up on fixed-rate home loans in anticipation of the Reserve Bank of Australia (RBA) cutting interest rates further, banker and insurer Suncorp says.
The RBA holds its monthly board meeting on Tuesday and economists are split on whether the central bank will hold the cash rate steady for another month or reduce it by a further 25 to 50 basis points.
Even if it doesn't cut the rate this month, financial markets are betting on further reductions this year towards two per cent.
The cash rate stands at a 45-year low of 3.25 per cent.
"The fact that our customers are typically continuing to favour the variable rate option indicates that they seem to be largely betting that the official interest rate will fall further," Suncorp's general manager of banking Terry Wasmund said.
New figures released by Suncorp on Monday showed that only one per cent of its customers took out a fixed rate home loan in February compared with 42 per cent a year earlier.
"We haven't seen a market like this for a very long time," Mr Wasmund said.
Still, mortgage broker the Loan Market Group said now was the time to be considering a fixed-rate mortgage.
It says fixed rates have already started moving up, even though official rates are expected to be lower this year.
Fixed-rate mortgages are based on wholesale market interest rates, while standard variable rates are usually led by official interest rate decisions.
"Many consumers are unaware that the variable rates move differently to fixed rates and by the time variable rates have bottomed they have missed the best opportunity to fix," Loan Market Group executive director John Kolenda said.
"If you are able to secure a great fixed rate in the high four per cent or low five per cent range for a three-to-five-year period then you should seriously look at it."
WA Newspaper
