Thought this was interesting, especially considering economists expect interest rates to rise in 2015.
(Taken from RPData Quarterly review.)
Housing finance data reveals that in June 2014, 85.7% of new loans to owner occupiers were on a variable or ?floating? rate. Unlike some other countries, Australian?s overwhelmingly prefer to take out variable rate mortgages rather than fixed rate loans.
This is despite the fact that at times (such as right now) fixed rate loans can have a significantly lower mortgage rate.
The other factor to keep in mind is that the typical length of a fixed rate mortgage in Australia is quite short, typically being less than three years.
The fact that most Australian?s are on a variable rate is of great assistance to the Reserve Bank. Essentially, having a large proportion of households with variable mortgage rates means that when the Reserve Bank adjusts monetary policy it has an almost immediate impact on consumer attitudes and spending patterns.
When you consider that a mortgage is most people?s single largest liability changes to monetary policy have a virtually immediate impact on consumer behaviour.
(Taken from RPData Quarterly review.)