Lenders scaling back discounts

by Adam Smith05 Mar 2012

Discounts are being scaled back by lenders in the wake of "shaky global economics".

Mortgage Choice data has indicated a 4% decline in ongoing discount rate loans. The loans fell to 42% of the company's approvals for February, down from 46% in January. Company spokesperson Belinda Williamson said the decline was the largest since Mortgage Choice began reporting on ongoing discount loans in November 2010.

"Lenders kicked off 2012 with a slew of loan discounts in a bid to compete for business in a subdued housing finance market. A number of these discounts were scaled back in February as lenders responded to shaky global economics and rising funding costs," she said.

The company also saw fixed rate demand remain steady in February, accounting for 21% of all approvals, leading Williamson to theorise that borrowers had yet to be spurred toward the products by lenders' out-of-cycle rate moves.

"We were surprised to find that despite lenders raising their home loan interest rates independently of the Reserve Bank during February, and ongoing concern around the direction of interest rates, our borrower data did not show any increased interest in the repayment security offered by fixed rate loans. The fact that only one in five new loan customers opted for fixed rate loans reflects that there is still a large volume of borrowers willing to ride the variable rate rollercoaster," she said.

However, the results stand in contrast to data released last week by aggregator AFG, which saw fixed rate demand hit an all-time high of 23.2%.

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