March 05, 2014
With the Reserve Bank of Australia indicating that the official cash rate could stay on hold for some time, borrowers are becoming increasingly comfortable taking out a variable rate mortgage.
According to the latest home loan approval figures from 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 sitting at historically high levels, it is clear borrowers are becoming less inclined to fix their mortgage in the current rate environment.
“In the February minutes of the Reserve Bank's Monetary Policy Meeting, the board made it clear that the official cash rate could be on hold for a prolonged period, stating that if the economy evolved broadly in line with expectations, then the “most prudent course would likely be a period of stability in interest rates”,” Ms Darnbrough said.
“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.”
According to Ms Darnbrough, ongoing discount variable rates continue to prove the most popular with borrowers, with this type of loan accounting for 40.94% of all home loans written throughout February.
Across the country, demand for variable rate products was highest in Victoria, with this type of home loan accounting for 82.53% of all loans written.
Western Australia wasn't far behind, with variable rate home loans accounting for 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 was up in all states bar South Australia and Queensland, fixed rates continue to sit at historically high levels – accounting for 26.08% of all loans written across the country last month.
“Both fixed and variable rates are very competitive at the moment. Australia's lenders are actively competing on price in a bid to attract greater market share. So, with this in mind, it is fair to say that now may be a great time to be a home buyer,” Ms Darnbrough said.
For archived copies of the Homeloan Choices bulletin, please refer to Choices Newsletter