Borrowers reject fixed rate mortgages

The percentage of fixed rate mortgages sold, compared to variable rate home loans, has plunged to about one per cent, from around ten per cent traditionally.

Infochoice CEO Shaun Cornelius says the lower exit costs associated with variable rate loans is the key factor driving the popularity of the variable rate product.

“A key factor o the popularity of variable rate loans is the lower exit fee, such as $600 to $700 compared to potentially several thousand dollars for a fixed rate mortgage.”

Mortgage Choice says that for the second month in a row, fixed rate loans account for just one per cent of all loans sold, the lowest level since 2003. Currently the interest rate gap between the average variable mortgage issued by a big four bank and a fixed rate product would add about $200 per month to repayments.

Source: The Daily Telegraph