Variable rate home loans are becoming increasingly popular while fixed rate loans are among the lowest levels in the past year.
According to the latest home loan approval figures from broking franchise Mortgage Choice, variable rates accounted for 73.92% of all home loans written in February – up from 72.57% the month before.
Mortgage Choice spokesperson Jessica Darnbrough said while demand for fixed rates is still high, it is clear borrowers are less inclined to fix their mortgage in the current rate environment.
The Reserve Bank decided on Tuesday to keep the official cash rate on hold, saying if the economy evolved in line with expectations then the most prudent course would likely be a period of stability in interest rates.
“With the threat of imminent rate rises now receding, it is unsurprising to see an increasing number of mortgagors taking out variable rate home loans,” Darnbrough said.
Across the country, demand for variable rate products was highest in Victoria, accounting for 82.53% of all loans written, she said.
Western Australia was not far behind, with variable rate home loans at 80.53%, while in New South Wales, South Australia and Queensland, variable rates accounted for 74.02%, 72.36% and 66.87% respectively.
But while demand for variable rate products increased in all states bar South Australia and Queensland, fixed rates held up well – accounting for 26.08% of all loans written across the country in February – although their popularity is waning since a historical high mid-last year.
Mortgage Choice research showed fixed rates accounted for 27.43% of all loans written throughout January – 5.63% lower than the month before.
Comparison website Finder.com.au money expert Michelle Hutchison said many borrowers are choosing to ride out the low variable wave but could miss out on bigger savings by not fixing their home loan.
“There has been a decline in the number of fixed loans financed, with a drop of 17% since its peak in May 2013, when the number of fixed loans financed reached a five-year high of 10,631,” she said.
However, Australia’s lenders are competing very aggressively on price within the fixed rate arena, which may prompt more borrowers to fix their loan.
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