Fixed Rate Home Loans Grow in Popularity as Interest Rates Rise

With fixed rates rising rapidly, the number of borrowers choosing to secure their home loans has plummeted.

The latest ABS lending indicators released this month show that the proportion of fixed loans funded in March was just 22%; down from the July 2021 peak when 46% of all new loans were fixed.

Source: ABS Lending Indicators March 2022, published May 5, 2022, seasonally adjusted data.

Some fixed-rate home loan rates have doubled in the past year

RateCity.com.au analysis shows fixed loan interest rates have risen sharply over the past year and the Big Four Banks average fixed 2, 3 and 4 year fixed rates have risen higher than doubled.

For example, the Big Four Banks’ 3-year average homeownership rate increased 2.31 percentage points from the same period last year.

Average of the lowest fixed rates of the big four banks 1 year ago compared to today

Rate Type 1 year ago Today Difference
1 year fixed

2.05%

3.02%

0.97%

2 year fixed

1.92%

3.87%

1.95%

fixed 3 years

2.01%

4.32%

2.31%

4 years fixed

2.15%

4.57%

2.42%

5 years fixed

2.49%

4.74%

2.25%

Source: RateCity.com.au. Rates are for homeowners who pay principal and interest. LVR restrictions may apply.

The total value of new home loans increases in March, but only slightly

The overall value of new home loans rose moderately in March according to March ABS data.

Loans to homeowners rose only 1.6% from the previous month, in seasonally adjusted terms.

Meanwhile, loans to investors were up 2.9% and 48.4% from March last year.

Value of new home loans approved in March

Value Monthly change Year-over-year variation
TOTAL

$33.28 billion

$528 million

1.6%

$3.33 billion

11.1%

Owner occupied

$21.57 billion

$200 million

0.9%

-491 million dollars

-2.2%

Investor

$11.71 billion

$327 million

2.9%

$3.82 billion

48.4%

Source: ABS Lending Indicators March 2022, published May 5, 2022, seasonally adjusted data. The annual variation is from March 2021 to March 2022. Excludes refinancing.

Jhe number of first-time home buyers increases in March

Homeownership loans rose 4.2% month-over-month in March.

However, year-over-year the numbers are down 33%, with 5,074 fewer first-time home buyers in March 2022 than in March 2021.

Owner-occupiers accessing the property in March

Rising Monthly change Year-over-year variation
Number of loans

10,394

417

-5,074

4.2%

-33%

Value of loans

$5.10 billion

285 million

-$1.72 billion

5.9%

-25%

Source: ABS Lending Indicators March 2022, published May 5, 2022, seasonally adjusted data.

National average mortgage size now $88,000 higher than a year ago

The national average new loan amount for owner-occupied housing is now nearly $600,000.

Compared to March last year, this represents an increase of $88,312, or 17%.

In New South Wales, the average amount of new mortgages increased by $128,842 compared to March 2021, while in Victoria it increased by $89,853.

However, as real estate prices are expected to fall in the coming months, it is likely that the average size of new loans will also decline.

Average amount of loans to new homeowners

Average loan amount Change monthly Change from 1 year ago
National

$599,922

$6,843

1.2%

$88,312

17.3%

New South Wales

$762,238

$7,928

1.1%

$128,842

20.3%

CIV

$629,727

$6,017

1%

$89,853

16.6%

QLD

$516,615

$4,464

0.9%

$65,408

14.5%

HER

$463,127

$18,716

4.2%

$78,994

20.6%

Washington

$455,563

$5,911

1.3

$37,292

8.9%

TAS

$451,438

$1,146

0.3%

$64,513

16.7%

Source: ABS Lending Indicators, March 2022, original data for owner-occupied dwellings. Includes the construction and purchase of new and existing housing.

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