Australian Bureau of Statistics data shows the number of fixed home loan rates in March was 14.5 per cent – the highest since May 2008 (14.2 per cent).

Most lenders have reduced both their fixed loans and variable loans in recent months. However variable rates appear to be on their way down. Those who chose to fix today may miss out in the longer run..

There is every expectation that as variable rates come down, fixed rates may fall further.

“It’s expected that fixed rates can’t really fall any further.

Fixed home loans remain a great way of allowing “stability” with your repayments but they can be costly if the fixed term is broken.

Borrowers need to understand that Lenders don’t price three-year fixed rates to be generous, they do it because they can make money out of it.

The Reserve Bank of Australia this month cut the official cash rate by 50 basis points to a two-year low of 3.75 per cent.

According to figures published by the Australian Bureau of Statistics, demand for home loans is finally on its way up.

Volume of new home loans written during the month of March showed an increase of 0.3 per cent , following a 2.5 per cent decline in February. It seems that these figures were not in line with expectations of leading economists.

JPMorgan senior economist Ben Jarman believes that this is a reasonable result which should only improve the demand for home loans going forward once the cash rate reduction announced this month by RBA takes effect.

Housing market has not been doing very well over the past 12 months as a result of low consumer confidence and economic problems throughout the world.

During May most lenders have reduced their home loan interest rates by anywhere from 25  basis points to 50 basis points and this is likely to improve demand for home loans in the medium term.

Auction clearance rates, also a good indicator of the health of the property and mortgage markets. Auction clearance was a little higher this weekend as compared to past weeks. Melbourne’s auction clearance rate was 63 per cent last weekend, according to the Real Estate Institute of Victoria.

In Sydney it was 61.8 per cent, according to Fairfax-owned Australian Property Monitors.

The number of first home buyer home loans as a percentage  of total owner occupied home loans, fell to 16.4 per cent in March 2012 from 17.2 per cent in February 2012.

Earlier today at the bank’s monthly rate review meeting, ANZ announced it would cut 37 basis points from its standard variable rate.

As of the 18 May, ANZ will be promoting a new variable rate of 7.05 per cent – coming in third after the NAB at only 6.99% and CBA a close second at 7.01%.

Now that the interedt rate direction has been set by all the major lenders we may see some more activity from borrowers looking to refinance their mortgage to a cheaper lender.

ANZ chief executive Australia Philip Chronican said the RBA’s decision to reduce the cash rate has resulted in bank funding costs coming down and making it possible to for the lender to review the costing of their own home loans.

“We continue to work hard to ensure we are competitive despite sustained funding pressure driven by the high rates we are paying to our 2.9 million deposit customers relative to the Reserve Bank’s cash rate and the ongoing volatility in wholesale money markets,” Mr Chronican said.

Cameron Clyne, the bank’s CEO, wouldn’t rule out a review of the strategy by the end of the year, which involved NAB making a public pledge to have the cheapest home loans amongst the big four banks.

Over the past 12 months or so the bank did very well with their “divorce from your current lender” marketing.

Earlier, NAB reported a cash profit of $2.83 billion for the six months to end-March, up 6 per cent from the same time a year earlier. Momentum, though, slowed from the September half where cash profit growth came in at 1.3 per cent.

NAB did suffer a 20% decline in it’s margins on home loans when the bank’s available funds could not keep up with the demand that it’s marketing campaigns were generating and the bank had to resort to accessing more expensive wholesale funds.

NAB’s reported retail banking profits of $464 million for the March half which represented an increase of 7.4 per cent from the same time last year, but a drop of 7.2 per cent from the September half.

After RBA cut the cash rate last week by 50 basis points,  NAB dropped its standard variable home loan rate 32 basis points to 6.99 per cent.

That rate still makes NAB the leader in cheap home loans amongst the big four.

NAB has furthermore  improved customer satisfaction and substantially improved its ability to gather deposits.

CBA cut the rates on their  three-year fixed rate loan by 34 basis points to only 5.99 per cent, while the one-year fixed home loan come down by 15 basis points, also to 5.99 per cent. If you have a home loan in excess of $150,000 you should be able to fix the rates as per above from today.

This rate reduction offers borrowers effectively a chance to obtain a home loan cheaper by more than 1% than the bank’s standard variable rate

While RBA announced a reduction of the Australian cash rate of 50 basis points last week, many experts are  predicting that further reductions are ahead.

CBA reduced by 40 basis points the rate applicable to the bank’s standard variable loans. These are priced today at 7.01%.  Banks are reporting the slowest growth in mortgages in more than 30 years.

Westpac ‘s  standard variable rate has come down by 37bps to 7.09%. In the same week the bank had reduced the minimum loan size which is eligible for the lender’s 0.7% rate discount, from $250k to $150k – a significant reduction.

Out of the six lenders that have already confirmed their intention with respect to interest rates, only one small lender – Unicredit WA – has passed on the Reserve Bank’s full rate cut of 50bps. However even with a smaller rate reduction borrowers will enjoy reduced mortgage payments.

It is certainly disappointing that the full RBA cut hasn’t been generally passed on, based on the actions of the 6 lenders to date, borrower’s mortgage repayments will be reduced by anywhere from $50 per week to $100 per week based on the average home loan sizes.

Westpac subisdiary St. George has also announced a cut to rates, dropping its standard variable rate 38bps to 7.04%, while fellow Westpac brand Bank of Melbourne has cut 41bps from its standard variable rate, dropping to 6.99%

AFG are reporting a very significant drop in the volume of mortgages written by their brokers from $2.9 billion in March to $2.2 billion in April 2012.

According to AFG, April is historically a slower month for borrowers because of school and public  holidays. But, in the context of the previous much stronger two months, the weaker than expected April data clearely showed the weakness in the Australian home loan market.

Borrowers adopted a wait and see policy. While there are some rather cautious First Home Buyers in the market, investors are holding back despite lower property values. There is an overall concern about the direction of property prices going forward.

One in five new home loans written by AFG during the month of April was for a fixed rate product. This is an indication of borrower uncertainty and attempt to secure a steady level of mortgage repayments over the foreseeable future.

The size of the average mortgage declined by $17,000 from $400,000 down to $383,000, the lowest since February 2011

When making their decision, RBA was mindful of the lower than expected inflation figures as well as lack of activity in property and construction.

New home sales have fallen to their lowest level in over ten years.  According to the latest data from the Housing Industry Association, new home sales fell by 9.4 per cent in March 2012.

It is hoped that most of the 50 basis points will be passed on by lenders to their home loans and thereby revive both property investment and property construction.

The March quarter CPI figures released last week pretty much places the RBA decision to cut rates into a “beyond doubt” category. Housing has shown particular weakness in the inflation data, and this has contributed to the general belief that rates are coming down.

There is a clear case for relief desperately needed in the construction industry. Home Loans industry is also down with potential borrowers losing interest in home ownership and property investment.

It is unlikely that rates will come down by 50 basis points as speculated  by some. RBA would not wish to implement such radical changes so quickly.

However we are likely to see up to 75 basis points taken off our variable rates before the end of 2012.

Property prices have seen their first quarterly increase in 20 months, and the result has prompted analysts to speculate that the property  market may have leveled out and could even turn the corner in not to far a future.

Australian Property Monitors data shows median values went up by 0.9% for houses and 0.1% for units, the first increase since June 2010. Every capital city apart from Brisbane and Adelaide saw increases over the quarter, with Darwin recording 6% for the quarter. Melbourne and Sydney were the next-best performers, with prices rising 1.4% and 1.6%, respectively.

APM senior economist Andrew Wilson said the future for house price growth would largely depend on the performance of national and local economies in the months to come. Nevertheless, he was optimistic about the prospects for some capital city markets.

“The Perth, Brisbane and Sydney home loans and housing markets show the most promise for growth over 2012, and although the Melbourne market has been encouraging so far this year, the future will depend on the Victorian economic indicators going forward.

Wilson predicted that the market would continue to improve on the back of the quarterly rise, with buyers and vendors showing more confidence in the economic future of Australia and hence Australian Property prospects.

“Early signs are certainly positive for most Australian housing markets in 2012 with the likelihood that buyer and seller confidence will continue to rise in 2012 after a subdued 2011,” he said.

There is therefore hope that as the property market recover so will the housing finance market. Early signs form statistics provided by Veda Advantage suggest that demand for home loans is up.