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Variable interest rate home loans continue to dominate the new loan approval market as borrowers bank on further rate cuts, according to national figures from Mortgage Choice.
Demand for variable rate loans reached a six-month high in January, accounting for 83.65% of the company’s new home loan approvals. Consequently, demand for fixed rate loans slipped, for the second consecutive month, to 16.35% of newly approved loans.
Mortgage Choice spokesperson, Belinda Williamson, says borrowers have fled from fixed rate loans and have instead opted for variable rates and says this is the first occasion since July, 2012, that demand for variable rates has been this high.
“These results come at a time when cash rate cuts from the Reserve Bank are still on the cards. There is now also the possibility of out-of-cycle variable rate cuts from lenders thanks to recent news of eased funding costs. In any case, we would expect to see any future rate cuts passed on in full to borrowers.”
Williamson says ongoing discount rate loans remained the top variable rate product for new borrowers, at 41.43% of approvals, in January.
She says the closest contender to follow was standard variable rates, with demand for this loan type rising by 3.83 percentage points to reach 20.61%, at the same time interest in basic variable rate loans remained relatively steady at 17.90%.
“This suggests that there is an increase in Australian borrowers who prefer to pay more in return for the extra flexibility and features offered by standard variable rate loans. Keep in mind that borrowers who have a large loan amount are likely to qualify for ongoing discount rate loans or may be able to negotiate a discount off their standard variable rate.
With variable loan demand rising in each state to reach a six-month high of almost 84% of approvals, she says it appears Australians are confident that rates will remain at very low levels for some time yet.
Demand for line of credit loans fell by 0.5 percentage points to 2.76%, while introductory rates remained steady at 0.95%.
