The race is on for home loan borrowers to fix their loans in the face of lenders increasing long-term rates and tightening lending conditions.
The banks are being squeezed by regulators to clamp down on lending and rising bond yields are being passed on to the consumer as the days of cheap money draw to a close.
The percentage of homebuyers fixing their loans has tripled in the last 19 months, mainly driven by record-low interest rates, booming house prices and fears of a COVID-affected economy.
RateCity says the three rate cuts since the coronavirus hit in March last year drove the percentage of fixed rate loans from around 13 per cent to nearly 50 per cent.
To give some perspective, new fixed rate home loans usually hover between 10 and 20 per cent.
“Fixed rates might be on the rise but they are still incredibly low in the scheme of things,” research director of RateCity, Sally Tindall, told Australian Financial Review.
Ms Tindall said mortgage brokers are comparing the rush on fixed rate loans to just prior to the global financial crisis when borrowers were forecasting rate hikes to cool overheated markets.
“The GFC took hold of our market and the Reserve Bank of Australia took an axe to the cash rate, leaving lots of fixed rate homeowners high and dry because they were stuck on what were suddenly high-rate loans,” she said.
Clover Financial Solutions broker Phoebe Blamey told AFR borrowers think rates are heading north sooner rather than later and are rushing to fix their loans for 2-3 years.
Mortgage broker Chris Foster-Ramsay said he was seeing the same thing.
“Borrowers are beginning to realise that rates have hit the bottom,” he told AFR.
