Property market jitters see Aussies preferring fixed-rate home loans

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May 24, 2017

Property market jitters see Aussies preferring fixed-rate home loans

Australians would like lending institutions to have a greater range of long-term fixed rate home loans, according to a new survey from Gateway Credit Union.

Image by mastersenaiper via Pixabay

Australians are keen to lock in interest rates at current levels amid concerns about the future direction of the property market, and expectations that interest rates are headed higher.

New research commissioned by Gateway Credit Union, which involved polling of 1,039 Australians, shows that 35.5 per cent of Australians considering taking out a home loan would choose a fixed-rate home loan over a split-rate (34 per cent) or variable-rate (30.7 per cent) home loan.

Paul Thomas, CEO of Gateway, said the findings indicate that borrowers are concerned about changing market conditions.

“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," he said.

In that environment, having "no control over repayments because of a fluctuating rate” would understandably make borrowers nervous, said Thomas.

“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.”

The survey showed that Australians are in favour of longer term loans. Over half (55.9 per cent) chose a 5-year term, just under a quarter (23.1 per cent) opted for a 3-year term, 15.1 per cent opted for two years, and 5.9 per cent chose a 1-year fixed rate.

Thomas said it was "interesting" to note that the longer-term loans were more desired than the shorter term loans.

"We all know the RBA is likely to raise rates, but these findings suggest borrowers think that once rates start to shift upwards they won’t be coming back down again for some time,” said Thomas.

The survey showed overwhelming demand for even longer term loans, with 71.3 per cent of respondents stating they would like lenders to offer longer-term fixed rate loans. Almost half (46.4 per cent) said they would like lenders to offer a 10-year fixed-rate home loan.