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Borrowers turn their back on fixed-rate loans

by Marquette Turner

in Money & Business, Real Estate Radar

Figures suggest that borrowers are shying away from fixed-rate home loans, a sign of growing belief that the economy is slowing enough to ward off interest rate rises.

Traders in financial markets are, however, betting on quite the opposite. Yesterday, they lifted their bets that the Reserve Bank of Australia will raise rates more than once by the end of the year. Michael Marquette of Marquette Turner continues to believe that we are likely to see at least two more rises by the end of the year.

By March, almost one in four borrowers chose to lock in their home loan rate to avoid being caught out by more increases. The demand for fixing loans waned, however, in April, and fixed-rate loans dropped back to 17.5 per cent of the total market.

This could perhaps suggest that borrowers are becoming more pessimistic about the state of the economy and therefore confident that inflation and rates could fall.

The unsteadiness of the market comes amid more evidence of a dramatic fall in confidence among prospective home buyers. Housing finance figures released by the Australian Bureau of Statistics showed the value of new housing loans dropped 3 per cent in April – the third month in a row of solid falls.

Christine Watson

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