Two-year fixed rates attract borrowers

The sharp switch is clearly the result of the price war in fixed-term mortgages between the banks which began in late April.

While total mortgage lending by banks grew by $752 million to $173.84 billion in June, up from the $612 million growth in May and $393 million increase in April, lending on floating rate mortgages slumped $2.62 billion in May and has fallen $4.57 billion since April.

On the other side of the coin, total fixed-rate mortgages written by banks jumped $3.3 billion in June. Floating rate mortgages now account for 60% of all bank mortgages, down from 61.7% in May and 63.1% in April which was the peak of the trend in place since August 2009 when they accounted for just 22.8% of the total.

The biggest growth has been in mortgages fixed for up to two years. Mortgages fixed between one and two years jumped $1.8 billion to $24.83 billion in June while those fixed for one year or less climbed $697 million to $36.61 billion.