To fix or not to fix: Mortgage rate decisions a key theme for 2025

In recent months, falls in mortgage rates have understandably meant there’s been a strong focus on the ‘short end’ of the curve, with borrowers mostly choosing floating rates or 6-12 month fixes. However, the timing of a possible shift to longer-term fixed rates is shaping up as a key theme in the mortgage market this year.

The increase in mortgage lending activity has been underway for more than a year, accelerating in recent months. Over September to November, the increase in activity from the same months a year earlier averaged $1.3bn, compared to a rise of $0.8bn in the prior six months.

By loan type, house purchasing and bank switches have been the main contributors to growth, with loan top-ups more subdued. Naturally, it stands to reason that top-ups would be less common in an environment where house prices have fallen and borrowers’ paper equity is lower (or their effective loan to value ratio/LVR is higher) than it might otherwise have been.

However, there are a number of other interesting aspects to these figures: