Fixed rate mortgages boom

CBA latest internal lending data shows a record boom in fixed rate mortgage lending.

As shown in the next chart, new lending for housing was up 50% year-on-year in April despite falling over the month:

CBA new mortgage lending

Record annual growth in new mortgage lending.

The average loan size has rocketed higher over the past few months. Rising dwelling prices mean that buyers generally need to borrow more than before:

CBA average loan size

Massive lift in average loan size.

The share of fixed rate mortgage lending has also hit a record high across both owner-occupiers and investors, accounting for around 45% of investor lending in the month:

CBA fixed rate lending

Record fixed rate mortgage lending.

However, fixed rate mortgage lending has pivoted to two-year rates reflecting that they are now cheaper than four-year rates:

CBA fixed rate mortgage lending

Pivot to two-year fixed rates.

Finally, lending for alterations and additions remains very strong reflecting that Aussies cannot travel overseas and are instead prioritising spending on the home:

CBA lending for renovations

Lending for renovations also up.

For the same reason, lending on household goods and cars has also trended up strongly:

CBA consumer lending

Lending on big household items has trended up.

The overall shift to mortgage lending makes sense in light of the massive decline in fixed mortgage rates:

Australian mortgage rates

Australian mortgage rates have fallen sharply.

The Reserve Bank’s decision to end the Term Funding Facility (TFF) in June will obviously lift fixed mortgage rates going forward and should shift mortgage demand back to variable rates.

Unconventional Economist
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