Aussies are keen for long-term fixed rate loans, Gateway Credit Union finds

More than a third of Aussies prefer fixed rate mortgages and many are even keen to lock in their rate for up to 30 years at a time in the face of interest rate uncertainty, according to recent research from Gateway Credit Union.

The research showed that 35.5% of Aussies would opt for a fixed rate home loan, followed by 34% who prefer a split rate loan and 30.7% looking for a variable rate loan.

The relative popularity of a fixed rate mortgage may be attributable to constantly changing market conditions and the current uncertainty facing borrowers, said Gateway CEO, Paul Thomas.

“We know property prices are sky high, compound that with low wage growth, high levels of household debt and out of cycle rate hikes and you can expect that consumers might be worried about maintaining a loan, especially if they have no control over repayments because of a fluctuating rate,” he said.

Not only are Aussie borrowers looking to lock in a rate - they’re in it for the long haul. Over half of Aussies said they’d lock in for a 5 year fixed term, while 23.1% favoured a 3 year term, 15.1% would opt for 2 years and just 5.9% prefer to lock in for 1 year.

Beyond that, 71.3% of people said they would like even longer terms to be on offer, including 46.4% who would lock in for 10 years and 15.8% who would commit to a rate for the entirety of a 30 year mortgage.

“We all know the RBA is likely to raise rates but these findings suggest borrowers think that once rates start to shift upwards they won’t be coming back down again for some time,” said Thomas.

The preference for long-term fixed rates was also influenced by factors such as where borrowers lived and how old they were. 

Thomas said that demand for fixed rate loans seemed to be fairly congruent with property prices. In the competitive and high-priced Sydney market, for example, 40.1% of borrowers preferred a fixed rate mortgage, compared to just 18.2% in Hobart, where property prices are much more manageable.

Similarly, 40.8% of 18-29 year olds and 36.4% of borrowers over 50 preferred a fixed rate - likely, Thomas said, because in these age brackets where people are just starting their careers or preparing for retirement, they tend to have less disposable income and may be looking for stability in their finances.

“Borrowers clearly want certainty and are looking to insulate themselves from unexpected shocks, whether that be with a fixed rate home loan or hedging their bets with a split rate. Regardless, what these results ultimately reveal is that Australians might just be worried and this is influencing their decisions when it comes to their home loan,” Thomas said.

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