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According to the company’s latest national home loan approval data, variable rate home loans accounted for 80.68% of all home loans written in April 2018. This was up more than 2% from the previous month and almost 6% higher than the 12 month average.
Mortgage Choice CEO Susan Mitchell said, “The data is largely unsurprising, especially when you consider that the Reserve Bank of Australia has left the cash rate on hold for over twenty months.
“Given that interest rates have been sitting at historical lows for so long now, borrowers see no urgent need to lock themselves into a fixed rate product. Further, lenders continue to compete aggressively on variable interest rate pricing, giving borrowers less incentive to fix their rates.”
Across the country and for the fourth consecutive month, variable rate demand was the highest in Victoria, with 91.70% of borrowers opting for this type of mortgage.
This was followed by South Australia where 87.99% of borrowers chose a variable rate home loan.
Borrowers in New South Wales were the least likely to choose a variable rate home loan, with 71.68% opting for this type of product.
Mitchell said a number of factors could influence the popularity of variable rate home loans in the future.
“The Reserve Bank’s decision to continue to leave the official cash rate on hold means borrowers are happy to ride the variable rate wave for now,” she said.
“That being said, speculation that the cash rate may rise as soon as springtime in 2018 means borrowers should not take a set and forget mentality when it comes to their home loan.
“Borrowers looking for home loan certainty ahead of any impending rate rises may also need to consider the possibility of banks passing on any increased costs of credit, despite the RBA official cash rate being anchored at 1.5%."
