Conservative borrowers fix their rates

Borrowers have demonstrated their conservatism over the past year by cutting back on credit card and other personal lending, and by making extra repayments on their mortgages.

The latest indicator of consumers' cautious attitude to their finances is that they are opting for the security of fixed-rate loans.

Mortgage aggregator AFG reported yesterday that 29.6 per cent of the mortgages its brokers wrote in March were for fixed-rate loans.

The proportion of fixed-rate loans has jumped, from 16.3 per cent in January to 24.1 per cent in February, and now to 29.6 per cent. AFG's general manager of sales and operations, Mark Hewitt, said this was the highest proportion of fixed-rate loans the company has sold in 10 years.

AFG brokers wrote 7898 mortgages in March, worth A$3.2 billion. This was an increase from 7480 loans, worth $2.9 billion, in February.

According to the Reserve Bank, the average three-year fixed home loan rate is 5.45 per cent. The average discounted variable bank rate is 5.65 per cent.

The insurance is that a fixed rate offers looks like a good deal when there is no premium to pay.