'Anticipation' responsible for variable rate popularity

by Caroline Dann02 Aug 2012

An 11-month peak in the popularity of variable rates is being blamed on the anticipation of further rate cuts.

Mortgage Choice said low inflation figures were contributing to an expectation that the RBA would drop the cash rate next week.

Spokesperson Belinda Williamson pointed to 2011's spike in variable rates in August as proof of a pattern emerging.

“The vast majority of borrowers are feeling as confident about variable interest rate movements now as they did back in August 2011, a time when borrowers had experienced nine consecutive months of steady interest rates, which was followed by rate cuts,” she said.

However, she said the decision to cut rates may rest on foreign investment.

“Any further cuts to the cash rate may send signals to foreign investors that our economy isn’t in good shape."

"Such a decision will also leave the Reserve Bank with little to nothing left in the petrol tank if domestic factors or the situation in Europe deteriorates,” she added.