Borrowers anticipate rate hikes on horizon

Adam Smith 5 June 2017

percent lockAn increasing number of mortgage holders are looking to fix their rate in anticipation of home loan rates rising throughout the year.

New research from Gateway Credit Union has found nearly 20% of variable of split rate home loan borrowers surveyed by the mutual are considering switching to a fixed rate. While the Reserve Bank is widely expected to leave rates untouched when it meets tomorrow, borrowers are increasingly wary of rising interest rates.

The survey also found that of those looking to switch to a fixed rate, 38% said they would do so in the next 3-6 months, while 24% said they would do so in the next 6-9 months.

“We’ve seen plenty of research that shows household debt is at all-time highs, but our research could suggest that a rise in home loan interest rates may very well tip some households over the edge financially which is why borrowers might be seeking the certainty of a fixed rate home loan,” Gateway CEO Paul Thomas said.

Thomas said the research indicated men were more inclined to switch to a fixed rate product than women (22.4% to 14.7%).

“Traditionally women tend to be more risk averse than their male counterparts when it comes to investment decisions. However, it seems like men may be more conservative when it comes to home loan repayments, opting to hedge their bets,” Thomas said.

Pros and cons of fixed rate home loans

Regional homeowners were also more likely to fix than their metropolitan counterparts, with 38% of regional borrowers indicating they were considering a fixed rate versus 18.8% of metropolitan borrowers.

“Regional communities can be more susceptible to economic shocks than capital cities. The lack of financial resilience in these areas can make homeowners far more vulnerable to volatility such as rising interest rates,” Thomas said.

Image: Shutterstock

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