The country’s biggest credit union, Credit Union Australia, says a near record proportion of its customers are taking out fixed-rate home loans, a sign more borrowers believe the next move in official interest rates will be a rise.
CUA chief executive Chris Whitehead said on Tuesday that close to 55 percent of the company’s new customers were opting to fix their mortgage, after a significant rise in the share of borrowers choosing to lock in a rate over the past few weeks.
While the credit union targets the fixed market and always tends to have a bigger share of fixed-rate borrowers than the industry average, Mr Whitehead said this was near a record high for CUA.
‘‘Over the last three to six weeks we’ve seen probably a 10 per cent increase in fixed rates as a proportion of total lending,’’ Mr Whitehead said. ‘‘It’s pretty much a high watermark for us.’’
‘‘It’s always a good indicator for us that people think rates have reached the bottom of the cycle.’’
The comments come after several big lenders have reduced their fixed rates in recent weeks, with National Australia Bank and St.George last week announcing cuts.
As well as more customers opting to fix, Mr Whitehead said there had been a significant shift towards longer-term fixed rate loans, such as five-year loans.
‘‘Traditionally, by far the biggest volume has been in three-year fixed rates, and that’s still the case, but we are seeing more people choose five-year fixed rates,’’ he said.
Fixed interest rates are set with reference to futures markets, and they tend to rise before official interest rates that influence the variable mortgage rates most people pay.
Economists are divided about whether the next change in official interest rates will be a rise or a fall, and investors are betting it keep the cash rate unchanged at 2.5 percent for at least the next six months.
Mr Whitehead made the comments after CUA reported first-half profits of $27.9 million, a full-year fall of 18.2 per cent after a one-off lift from asset valuations last year.
Latest official figures show the proportion of new home loan customers who opted for a fixed rate in December was 16.8 percent, above its long-term average but still shy of the 20.6 percent level reached in March last year.
By Jayden Vecchio Google+