The likelihood of the cash rate remaining low is prodding more borrowers to go for variable rate home loans and forgo fixed rate products.
Nearly 78% of borrowers opted for variable home loans in January, with only 22.07% going for fixed rate loans,
Mortgage Choice’s latest national home loan approval data shows.
“We started to see demand for fixed rate home loans drop off in September 2017, and it would appear that trend has continued right into the New Year,” said Mortgage Choice CEO John Flavell.
This does not come as a surprise when one considers that the Reserve Bank of Australia has kept the official cash rate on hold for 17 months, he said.
“And, with all signs suggesting that that cash rate is likely to remain lower for longer, borrowers are feeling increasingly comfortable opting for a sharply priced variable rate home loan.”
Flavell said he would not be surprised to see a continued decline in fixed rate demand.
“We may continue to see more people choose a variable rate home loan, particularly if the Reserve Bank of Australia continues to leave the official cash rate on hold,” he said.
“Borrowers are happy and content to ride the variable rate wave at the moment. Of course, that could all change in an instant if the Reserve Bank of Australia was to start lifting the cash rate.”
By state, Queensland recorded the highest level of demand for fixed rate loans, which accounted for 26.33% of all loans written in January, up from 19.91% the previous year.
NSW came in second with 24.88% of all loans written being fixed rate.
For the second month in a row, demand was lowest in Victoria. Fixed rate loans accounted for only 14.35% of all home loans written in the state in January.
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