According to Mortgage Choice’s home loan approval data, demand for fixed rate home loans has stalled, accounting for 14 per cent of all home loans written throughout the month of October, the same proportion as the month prior.

Mortgage Choice Chief Executive Officer Susan Mitchell said their home loan data revealed that despite extremely competitive fixed-rate pricing, borrowers are 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. In fact, fixed rate loans accounted for a quarter of all home loan demand in October 2018," said Ms Mitchell.

At a glance:

• Fixed home loans account for 14 per cent of all home loans.
• Despite competitive fixed-rate pricing, borrowers don't want to lock in.
• Victorian borrowers were least likely to lock in (7 per cent), while NSW borrowers were most likely (18 per cent).

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

“That being said, speculation is rife that the Reserve Bank of Australia will cut the cash rate a fourth time this cutting cycle, which would be reason enough to keep borrowers from locking in.” 

Demand for fixed rate loan products varied across the country.

Borrowers in Victoria were the least likely to fix, with only 7 per cent of borrowers locking in their rate, followed by Western Australia where 8 per cent locked into a fixed rate product.

Meanwhile, borrowers in New South Wales were the most likely to choose a fixed interest rate home loan, with 18 per cent choosing this loan, followed by borrowers in South Australia, where 17 per cent chose to fix.

“I suspect fixed rate demand is likely to remain at the same levels into the new year," said Ms Mitchell.

“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.

“My advice to borrowers who foresee a change to their income or face the possibility of budget constraints would be to speak to their mortgage broker. If you seek the comfort of knowing that you will have home loan repayment certainty, a fixed rate loan might be the right option for you.

Ms Mitchell said 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," said Ms Mitchell.

“Borrowers who are deciding whether to opt for a home loan with a variable, or a fixed interest rate would be well advised to speak to their local mortgage broker to discuss their options.”

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