As we head into 2012 pondering where the housing market is headed – will it be down 10 per cent as some commentators are expecting, or will others be on the money with predictions of 5-7 per cent growth – there is some interesting news emerging about home loans. Out today are figures showing mortgage holders are increasingly being lured by fixed rates.
Despite predictions about one, two or even three rate cuts coming over the next six months, a growing number of homeowners are locking in their rates now. Data from the Australian Bureau of Statistics shows fixed loans grew from 10.6 per cent of new housing loans before the most recent rate cut in November to 11.1 per cent.
And mortgage broker AFG reveals that 19.2 per cent of loans arranged through its business in December were issued at fixed rates, a big jump from 8.2 per cent six months earlier.
An odd move you may think given all the predictions are for official rates to fall further this year. But CommSec economist Savanth Sebastian argues people are simply getting in at what they can afford.
"It's more about ensuring you can purchase a place within your budget and within your limits," he says. "While the risks are to the downside [for rates to fall], I think the fixed rate market has already priced in a couple more rate cuts," he says.
In addition "even though the Reserve Bank will cut rates, the banks need to pass it on. So the fixed market is looking very attractive, not only do you need a couple more rate cuts [for variable rates to match fixed] but you need it all to be passed on as well to justify where the fixed market is."
Many homebuyers may also be wary that should there be a swift change in the economy, rates can easily shoot back up.
"We saw straight after the GFC how rates rose, it certainly would have caught some home buyers that were on the edge in terms of repayments, so at least this way they can sleep easy," says Sebastian.
Further news on the home loan front could point to a slightly more positive year for property than last, where we saw prices fall across the board. Australian Bureau of Statistics figures have revealed that the number of new owner-occupier housing loans rose by 1.4 per cent in November while the value of loans rose by 2.2 per cent.
However, home loans aren't being drawn down – rather potential buyers are simply getting their finance sorted and sitting back and waiting until the right time to buy.
So while for the past eight months there's been consecutive jumps in the number of home loans being approved, in November the value of loans that had actually been drawn down was two per cent lower than a year ago, and commitments not advanced were almost 11 per cent higher than the previous year.
With all the concern about the state of the US and European economies, it's little wonder buyers have been taking a cautious approach.
So just what will entice all these cashed-up potential home buyers to jump? Could a February rate cut be enough?
CommSec's Sebastian thinks so. "Even the thought of rate cuts should prompt activity levels to increase over the next few months," he says.