June 01, 2016
Following the Reserve Bank of Australia's decision to cut the cash rate in May, demand for variable rate mortgages has improved.
According to Mortgage Choice's latest national home loan approval data, variable rate home loans accounted for 76.11% of all loans written in May – up 0.52% from 75.59% the month prior.
“After the Reserve Bank's decision to cut the cash rate at its May Board meeting, three of the four majors passed on the full rate cut – trimming their variable rates by 25 basis points,” Mortgage Choice chief executive officer John Flavell said.
“With that in mind, it was hardly surprising to see a lift in demand for variable rate products this month. Borrowers are clearly looking to take advantage of the historically low rate environment.
“And, with many economists predicting at least one more rate cut this calendar year, I wouldn't be surprised to see demand for variable rate products remaining strong for the foreseeable future.”
Across the country, demand for variable rate products was highest in Victoria, with this type of product accounting for 86.65% of all loans written in May.
Western Australia and South Australia weren't too far behind, with variable rate products accounting for 78.62% and 77.85% respectively.
Variable rate demand was lowest in New South Wales, with this type of product accounting for 71.47% of all loans written.
Of the different variable rates on offer, ongoing discount products continued to prove the most popular with borrowers, with this type of product making up 46.01% of all loans written throughout the month of May.
“Regardless of whether Australians decide on a variable rate, fixed rate or split rate mortgage, they can be guaranteed of securing themselves a very competitive interest rate,” Mr Flavell said.
“With the cash rate hitting 1.75% in May, the interest rates offered by Australia's lenders have never been lower. These low interest rates are making the cost of borrowing more affordable than ever before – which is great news for home buyers, refinancers and investors.”