The number of home-buyers locking in their mortgages to a fixed interest rate, rather than the variable rate, to avoid the possinblity of a still higher interest rate burden has nearly doubled during the past year.
Australians borrowed a total of $20.53 billion during June in a sign of a rebound in the national property market. The surge was led by people buying investment properties to take advantage of the tax breaks on offer last year.
The property finance results showed people borrowed 2 per cent more during June compared with the month before.
Nearly 64,000 houses were bought despite the Reserve Bank of Australia raising rates just one month earlier.
The number of new mortgages taken out and fixed for two years has started to climb, according to the Australian Bureau of Statistics' figures.
During June, 10,963 loans were fixed, which accounted for 16.7 per cent of all the mortgages.
The result was up from just 10.3 per cent last year, showing home-buyers were concerned about the future movements of interest rates.
Economists said yesterday the 2 per cent rise in borrowing levels was further justification for the RBA's August rate rise.
The double blow of two rate increases is expected to cool the national appetite to borrow money.
TD Securities chief economist Stephen Koukoulas said there was room for growth in the housing market over the next few months. "Housing finance commitments are continuing to power ahead," he said. "The level of interest rates were no constraint to stronger levels of activity."
Mr Koukoulas said the level of investment in housing should move even higher later this year.
But one downside in the finance figures was a sustained fall in the number of first home buyers.
Of all of the purchases, 17 per cent were first-time buyers - the lowest for a year. CommSec economist Craig James said the size of mortgages was forcing those who rent to stay put.
The average home loan is now $227,800 in Australia.
The value has fallen over the past six months and is growing at the slowest rate in nearly five years.
"First home buyers are heading for the exit doors, with the exodus likely to continue in coming months," Mr James said.
"First home buyers are caught between a rock and a hard place. Mortgages are more expensive, causing buyers to retreat to the sidelines."
Economists said the growth in borrowings would not overly concern the RBA because it would have factored it into the decision to raise rates. The next rate movement is still expected to be in November.
Souce: Newscorp
