Due to the volatility of financial markets and the increase in interest rates, there has been an increase in the popularity of fixed rate mortgages. Of all the mortgages taken last year approximately one out of ten borrowers chose fixed rate loans. However, mortgage value dropped by ten percent from $30 billion to $27 billion. The average mortgage amount last month in New South Wales was $432,540.

This amount is higher than the $414,202 a year ago and the December 2010 NSW average is the highest among all Australian states and territories. Interest rate hikes and the mining tax brought financial volatility in the market. However, the rise of smaller lenders will increase market activity.

In December 2009, only two percent of all mortgages where fixed rates. One year later, the share of fixed rate mortgages jumped close to 13 percent. The big increase can be attributed to fear of future interest rate hikes causing borrowers to shop for fixed mortgages. Meanwhile, building approvals in November 2010 went down by 4.2 percent and close to ten percent throughout 2010.

However, the effects of the Reserve Bank official cash rate hike last November have not taken full effect. The housing market can expect more woes during the early part of 2011. Building approvals in New South Wales and Tasmania went down by 13.4 percent and 15.6 percent respectively. Building approvals in Western Australia increased by seven percent.