March 05, 2012
Demand for ongoing discount rate home loans waned nationally during February, while borrowers' fondness for fixed rate loans steadied, according to loan approval data from Australia's largest independently-operated mortgage broker, Mortgage Choice.
Uptake of ongoing discount rate loans - where the interest rate is discounted over the entire loan term usually in exchange for an annual fee - fell to 42% of all new home loan approvals in February, from 46% in January but well above the 12-month average of 38%.
Fixed rate loan demand steadied in February, at 21% of all new home loan approvals, on par with January and the six-month average, but ahead of the 12-month average of 16%.
Company spokesperson Belinda Williamson said, "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."
"Our loan approval data supports this trend, showing a four percentage point fall in ongoing discount rate loan approvals in February. This is the largest decrease since we began reporting on this loan type in November 2010.
"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."
Demand for basic variable loans rose to 17% of all approvals in February, from 14% in January while standard variable loan demand grew marginally to 16% from 15%. Line of credit loan popularity held steady at 3% and interest in introductory rate loans remained below 1%.
Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to approx. $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 19 year old mortgage broker has a loan book of over $42 billion.
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