Standard variable loan popularity hits 18-month high
Despite the cost difference between fixed and variable interest rates dropping, June saw a higher percentage of Australians turning their backs on locking in their home loan rate.
According to the latest loan approval data from Mortgage Choice, Australia?s largest independently-owned mortgage broker, only 2.6% of new borrowers chose a fixed interest rate for their home loan. This compared to 3.3% in May and 1.8% in April.
“Many people in the industry were expecting a rise in fixed rate demand last month but that hasn’t happened with our customers. Instead we’ve seen this product’s popularity reduce by one fifth,” said Mortgage Choice senior corporate affairs manager, Kristy Sheppard.
“Further, our June data shows fixed rate loans have represented less than 5% of all new approvals for the past 10 months and less than 10% of approvals for two years now.
“It was interesting to note the proportion of fixed loans to new borrowers dropped in all states apart from Western Australia, which was a complete reversal of last month’s trend.
“So, although we’ve seen a swift rise in rates from October through to March and the cost of fixing a loan continues to decrease, demand for variable interest rates remains at near-record highs. Perhaps the price tag is still too high when potential borrowers weigh up the advantages and disadvantages of fixed versus variable.
“Or perhaps whispers of a much steadier cash rate are seeping through and wielding influence over borrowers? decision processes.”
Standard variable loan demand reached 50.1% of June loan approvals, which was an increase on 47.8% in the month prior and the highest level reached since October 2008.
One of the key reasons for the popularity of standard over basic variable loans is the plethora of quality professional packages’ on offer with these products, which attract customers with benefits such as rate discounts, ‘Gold’ credit cards and other special features.
Other key home loan choice trends for the first month of winter were:
- Basic variable: fell to 41.9% from 43.5%.
- Line of credit (often popular with investors): fell to 5.3% of approvals from 5.4%.
- Bridging (for those selling property while purchasing another): remained well below 1%.
Note: Mortgage Choice’s annual loan approvals are approximately 40,000 nationally and therefore provide a clear insight into the product preferences of housing loan borrowers generally.
Story from www.australianhousehunters.com.au