Australian borrowers gravitated more on securing fixed mortgage packages, according to a new report, because they deem the rates more stable at the moment, with lenders offering more premium with the product.

The Australian reported on Thursday that fixed rates contracted by home loan applicants grew by 12 per cent by the end of February this year as against to standard variable rates, coming from the mere three per cent recorded in May 2010.

The figures, according to the paper, were supplied by leading online home loan rates tracker Rate City.

"Because long-term money is relatively cheaper at the moment, the banks have been able to offer very aggressive fixed rates in the past year," Rate City Chief Executive Damian Smith told The Australian.

The report added that the country's major banks have been luring customers to zero-in on long-term fixed rate loans, with the likelihood of getting up to 100 basis points more affordable terms when pitted to short-term mortgages.

The maximum benefits from the fixed offerings, according to Mr Smith, can be had if home loan applicants would opt for the three-year term, which so far has attracted the most attention from budget-conscious borrowers.

"There is about a 50 basis points difference in the average fixed and variable rates once discounts are taken into account, which is a reasonable gap by historical standards," Mr Smith added.

The Rate City executive noted too that local borrowers appeared to be flocking on banks' fixed loan offerings despite the bad experience that many had encountered at the onset of the global financial downturn in 2008, with people wrongly assuming that rates would continue shooting up to protect the domestic economy.

"But rates started to plummet, which took variable rates down. People who took fixed rates in 2008 were then up to 300 basis points worse off by 2009. The emergency rate cuts really hurt people," Mr Smith pointed out.

The report came out amidst strong expectations by economists that the Reserve Bank of Australia (RBA) will finally deviate from enforcing its rate hold policy in the past four months and cut the cash rate to 4 per cent, coming from the currently in-effect 4.25 per cent interest rate.

Economists are in agreement that the RBA board will opt for further rate reductions in the aftermath of the anticipated budget surplus that the Labor-led government has vowed to present on May.

Cutting back the rates is also seen as a way for the local economy to prosper despite the remaining challenges being faced by major economies the world over, specifically in the eurozone, with the UK, according to Bloomberg, officially in recession as of Wednesday.