Home buyers not panicked into fixed rate loans
Home owners are not being panicked into switching to fixed rate loans, despite the nation’s largest home lender recently raising its standard variable mortgage rate, a broker says.
Earlier this month, the Commonwealth Bank of Australia raised its variable rate by 10 basis points, blaming higher funding costs.
Loan Group executive director John Kolenda said the company’s brokers had received few inquiries about fixed rates despite the increase.
“The lack of demand to switch to fixed rates indicated the majority of home owners believed they would be better off sticking to variable rates while the economy remained in decline,” Mr Kolenda said.
He said most economists thought the Reserve Bank of Australia (RBA) was more likely to reduce the official cash rate below the current level of 3.0 per cent over the next 12 months due to rising unemployment.
He said home owners were enjoying variable rates of about five per cent, the lowest in almost 50 years.
“The opportunity to lock in a long-term fixed rate in the low five per cent range has probably passed as the major banks have already significantly increased their fixed rates,” he said.
Mr Kolenda said people may also be wary of locking into fixed rates as many mortgage holders were caught out switching from variable rates prior to the economic downturn.
According to the Australian Bureau of Statistics, more than 125,000 people locked into fixed rates of more than eight per cent in the 12 months to August 2008.
“Those people then watched as the RBA reduced the cash rate by more than four per cent in response to the global financial crisis,” he said.
AAP
Loading ...
Howard June 26, 2009
People need to weigh up the chance of a return to the mid teens level of interest rates like we saw in the early 90s.
It seems remote now, but with US, UK & Europe doing quantitative easing (a.k.a. printing money) inflation has to be possible once again.
7.19% fixed for 5 years might sound expensive compared to 5.19% variable, but we’re headed back there at some time. Better to lock in at that now, rather than pay 15% when inflation gets away on us.