Variable rates have seen a modest increase in popularity on the back of the Reserve Bank’s cash rate cuts.
Data from Mortgage Choice has indicated variable rates accounted for 79% of all the company’s approvals in May. The result was up 1% from April, but varied by state. South Australia saw variable rate loans increase in popularity by 12%, while variable rates actually declined in Victoria, falling by 5%.
Mortgage Choice spokesperson Belinda Williamson said the increase in variable rate popularity was driven by uptake of basic variable rates.
“Out of all the variable rate home loan types, basic variable rates - which tend to be more affordable but less flexible with fewer features at the borrower's disposal - were the only loan product to gain in popularity over the month, with demand rising to 17% in May from 14% in April," she said.
This increase, Williamson said, could carry with it a message about consumer demographics in the housing market.
"The increased interest in basic variable rate loans, which is now at a nine-month high, could signal a return to the market by first homebuyers, as these loans tend to be more popular with lower income and less experienced borrowers who are still finding their feet in home loan market," she said.
Fixed rates, meanwhile, fell 2.5% in popularity. Once again, Williamson said the change in demand varied geographically.
"Victorian borrowers were the only group to record a fall in variable rate demand and a rise in fixed rate popularity. This more conservative approach by a growing number of borrowers may again be linked to an increase in price-sensitive first homebuyers entering the market now to beat the removal from 1 July of the state's First Home Owner Bonus and Regional Bonus, and wanting the security of a fixed repayment level,” she said.
"The biggest tumble in May of fixed rate loan popularity took place in South Australia. There, fixed rate loan interest was down 12% compared with April. South Australians are wholeheartedly embracing recent variable rate cuts, and appear to have more faith in the general interest rate outlook,” Williamson added.
Fixing a fad as numbers hit four-year high
Fixing still favoured as RBA cut looms