Fixed-rate home loans remain unpopular

author-avatar By on November 21,2019
Fixed-rate home loans remain unpopular

Photo by Stefan Spassov on Unsplash

New data has revealed demand for fixed-rate home loans stalled in October despite record low rates.

According to Mortgage Choice home loan approval data, fixed-rate home loans only accounted for 14% of all loans written last month, the same proportion as the month prior.

Mortgage Choice CEO Susan Mitchell said despite extremely competitive pricing, borrowers were reluctant to lock in a fixed rate.

“The level of demand for fixed-rate home loans has not changed in four months and is significantly lower year on year,” Ms Mitchell said.

“In fact, fixed-rate loans accounted for a quarter of all home loan demand in October 2018.

“In the current low-rate environment, we are seeing interest rates on fixed-rate home loans fall below 3% p.a, which makes it even more surprising to see fixed rate demand hover at levels not seen in eight years.”

With the Reserve Bank widely tipped to cut the cash rate in February of next year, it would appear borrowers are betting they can get a lower rate still.

Demand for fixed-rate products varied across the country, with borrowers most likely to fix in New South Wales (18%), closely followed by South Australia (17%).

Borrowers in Victoria were the least likely to fix, with only 7% choosing to fix their loan.

Borrowers with a fixed or variable mortgage (%)

Variable 82% 92.6% 85.4% 82.6% 92.2%
Fixed 18% 7.4% 14.6% 17.4% 7.8%

Source: Mortgage Choice

Ms Mitchell said she expected fixed-rate demand to remain unchanged into the new year.

“With such low-interest rates on offer, now could be a great time to lock into a fixed rate home loan or make the decision to fix part of your home loan so can enjoy the best of both worlds.

“Ultimately, the answer to the fixed versus variable debate will come down to each borrower’s unique financial situation, needs and long-term goals.

Those seeking the comfort of home loan repayment certainty would benefit from a fixed rate, she said.

“That being said, if you want to take advantage of rate drops, a variable rate home loan might be a more suitable choice.”

“We have seen variable rate home loan interest rates fall significantly off the back of three cash rate cuts from the Reserve Bank of Australia.

“If the RBA cuts the cash rate again, we could see variable rates drop even further.”

The table below shows a collection of some of the lowest fixed interest rates on the market.

Provider Ad rate p.a. Comp rate* p.a. Monthly repayments  
Great Rate Discount Fixed 1yr 2.79% 3.82% $1,641 More details
Fixed OO P&I 3yrs 2.84% 3.37% $1,652 More details
Fixed Rate 2yrs OO P&I 2.88% 4.34% $1,660 More details
Basic Fixed 80% 3yrs 2.94% 3.36% $1,673 More details
Tailored Fixed P&I 3yrs 3.08% 4.46% $1,704 More details
Ad rate p.a. Comp rate* p.a. Repayments
Great Rate Discount Fixed 1yr
2.79% 3.82% $1,641
More details
Fixed OO P&I 3yrs
2.84% 3.37% $1,652
More details
Fixed Rate 2yrs OO P&I
2.88% 4.34% $1,660
More details
Basic Fixed 80% 3yrs
2.94% 3.36% $1,673
More details
Tailored Fixed P&I 3yrs
3.08% 4.46% $1,704
More details

Base criteria of: a $400,000 loan amount, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 2 December 2019. View disclaimer.

New lending to households has risen

The new value of seasonally adjusted lending commitments to households rose 1.1% in September 2019, according to the Australian Bureau of Statistics (ABS).

The September increase follows a 3.8% rise in August and a 4.2% rise in July.

ABS Chief Economist Bruce Hockman said this was the fourth straight month the value of new lending commitments to households had risen.

“The renewed growth in household lending commitments continues to be spurred on by new commitments for owner occupier dwellings, which rose 3.2% in September,” Mr Hockman said earlier this month.

The number of loans to first home buyer owner-occupiers fell for the first time this year, down 1.9%.

However, compared to September 2018, commitments were up 6.8%.

New lending commitments for investment dwellings fell 4.0%, following three straight months of rises, driven by 6.5% and 7.0% falls in Victoria and Queensland respectively.


The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

In the interests of full disclosure, and are part of the Firstmac Group. To read about how manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure. The interest rate per annum is based on a loan credit of $150,000 and a loan term of 25 years.

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Alex joined in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.


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