New data from ABS shows that fixed-rate lending has all but disappeared.
Over the last 12 months, fixed rate mortgages have fallen from 45% of new lending to just 5.5% in July. This is a noticeable change in such a short period of time.
Fixed-rate mortgages typically account for about 15% of new lending. However, attractive interest rates during the pandemic (often below 2%) have encouraged large amounts of fixed-rate borrowing.
These inexpensive loans were partly funded by the RBA’s Temporary Term Funding Facility, which expires in June 2021.
The main change is the rise in interest rates. Fixed rates are now more than two points higher than he was a year ago, reflecting a marked shift in interest rate expectations.
More borrowers are opting for variable rate loans than we’ve seen in a while.
This leaves more borrowers at the mercy of prevailing interest rates, which have risen at the fastest pace since 1994.