More borrowers are choosing variable rate home loans, in light of the RBA
cash rate cut last month.
The latest from Mortgage Choice’s national home loan approval data shows 80.44% of all loans written throughout February were variable rate home loans, up from 79.45% in January.
Ongoing discount products proved the most popular amongst borrowers, with this type of home loan accounting for 42.15% of all loans written last month.
Mortgage Choice spokesperson Jessica Darnbrough says this behaviour from borrowers is expected given the amount of rate speculation.
“On top of that, speculation continues to mount that the Reserve Bank will look to cut the cash rate again in the not-too-distant future, which could cause home loan rates to fall even further,” Darnbrough said.
“As such, it is unsurprising to see an increasing number of borrowers opting for a variable rate home loan, as they look to take advantage of the falling rate environment.”
She said in the last 12 months, demand for fixed rate home loans has fallen considerably.
“In December 2013, fixed rate demand peaked at 33.06%, while today this type of home loan accounts for just 19.56% of all loans written.
“While fixed rate pricing has dropped dramatically across the board in recent months, it seems borrowers are more comfortable taking out a variable rate mortgage,” Darnbrough said.
The data shows variable rates were most popular in Victoria, with this type of home loan accounting for 88.00% of all loans written.
South Australia and Western Australia were close contenders with variable rates accounting for 86.06% and 80.79% respectively.
Variable rate mortgages were lowest in Queensland, accounting for 76.83% of all loans written within the state last month.
“Regardless of whether a borrower opts for a fixed or variable rate product, they can be assured of securing a very competitive rate,” Darnbrough said.