Homeowners fear that interest rates have bottomed and that they will rise so they are rushing to lock in their mortgage rates.
After the Commonwealth Bank raised its variable rate by 0.1 per cent mortgage brokers and comparison websites have been inundated with fixed-rate mortgage inquiries.
The Daily Telegraph has reported that many new buyers and homeowners were looking to convert to a fixed rate after they became alarmed by the Commonwealth Banks variable rate rise.
There has been a sharp increase in fixed rate home loan applications for the second consecutive month of May, and is likely to continue into June. Here at Rate Detective we have also noticed a big push for enquiries towards fixed rates.
Spokeswoman for Mortgage Choice Kristy Sheppard stated that it was interesting to see new borrowers locking in rates, despite the fact that fixed loans are priced higher than variable loans. This would suggest that variable mortgages were being shunned.
It has been estimated that 50 per cent of all mortgage inquiries focused on fixed-rate products, compared with 15 per cent for variable products. However less than two months ago, borrowers who took the trouble to shop around could lock in a three-year fixed interest rate of 4.99 per cent.
Currently the cheapest three-year fixed rate on offer is 6.29 per cent from RAMS. While the lowest variable rate of the major banks remained at 5.74 per cent, their three-year fixed rates have shot up as high as 6.69 per cent.