A new survey has shown that a lot of Australians would like to be offered longer-term fixed rate home loans.
Gateway Credit Union surveyed 1000 people in Australia and 71 per cent of respondents said they’d like to see lenders offer longer term fixed mortgages.
Around 46 per cent of those surveyed wanted 10-year fixed loans, with those wanting 15, 20 and 30-year fixed loans all representing around 15 per cent of respondents.
The least popular fixed loan term was for 25 years, with only 7 per cent of those surveyed wanting a fixed loan for that duration.
The results are probably unsurprising given the uncertainty around the economy and market in recent times, and Gateway Credit Union’s CEO Paul Thomas gave his thoughts to Broker News.
“We know property prices are sky high, compound that with low wage growth, high levels of household debt and out of cycle rate hikes and you can expect that consumers might be worried about maintaining a loan, especially if they have no control over repayments because of a fluctuating rate,” he said.
“A fixed rate home loan means borrowers would have peace of mind in uncertain times and the findings suggest that it’s a key consideration right now.”
While longer-term loans were gaining in popularity, Mr Thomas explained that loans longer than 10 years were far less in demand.
“First, unlike our American counterparts, Australia has typically always been a variable rate home loan nation. Historically, we’ve preferred variable rate home loans, which have been around longer than fixed rate products,” he said.
“The other factor is the time horizon. Average mortgage churn occurs every five to seven years. Anything longer than a 10-year loan term may not be desirable because borrowers would want to avoid breaking the loan and paying associated break costs.”
“Lastly, it is difficult for borrowers to predict what will happen with interest rates over such an extended time period,” he told Broker News.
“In my experience, a fixed rate home loan is all about certainty. Borrowers who want peace of mind that their rate won’t change for a set period are willing to live with a slightly higher interest rate.”
Mr Thomas said the keenness of borrowers to fix their loans for ten years indicates they don’t think interest rates will start heading back down once they begin rising from their current record low of 1.5 per cent.