August 03, 2011
The demand from new borrowers for fixed interest rate home loans continued growing into the new financial year, reaching 13.3% of all approvals for Australia's largest independently-owned mortgage broker, Mortgage Choice.
However, results across the states varied more widely than the month prior. NSW and QLD experienced an uptick in fixed term loan approvals, while SA, WA and VIC saw falls.
Ongoing discount home loans, where the interest rate is discounted over the entire loan term usually in return for an annual fee, were the greatest success story amongst new mortgagors. Increased popularity in each state saw the national take-up rate reach an unprecedented 39%.
Company spokesperson Kristy Sheppard said, "Lenders continuing to reduce their fixed rates, to the point where they are often lower than the basic or discounted variable rate, is a key influence on the rise in demand for this home loan type. So too is consumer conservatism."
"However, some states are starting to show a turn in sentiment away from this less flexible loan type that provides budgeting peace of mind.
"At the same time, all states are increasing their focus on discounted rate home loans. This is unsurprising given the array of deals on the table as lenders vie for greater market share.
"With the cash rate on hold for the longest period since November 2006 to August 2007, this month we may see a reduction in fixed rate appetite and continued growing hunger for ongoing discount rate home loans to the point where they account for almost one in two new loans.
"Upcoming borrowers will be adding up the value they place on guaranteed steady minimum repayments against the chance of a longer stretch of steady interest rates."
Basic variable rate home loans overtook standard variable to hit second place in the popularity stakes for July, at 20.2% of approvals, though standard variable followed closely at 19.9%. Demand for line of credit home loans, often more popular with investors, fell slightly to 4.7% of approvals as did introductory rate loans to 3.3%.
Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to over $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 18+ year old mortgage broker has a loan book of over $40 billion.
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