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Fixed rate popularity reaches 6-month high

Demand for fixed rate home loans reached a six-month high in October as borrowers locked in low interest rates for an average of three years, according to the latest loan approval figures from Mortgage Choice, Australia’s largest independently-operated mortgage broker.


November 02, 2012

Demand for fixed rate home loans reached a six-month high in October as borrowers locked in low interest rates for an average of three years, according to the latest loan approval figures from Mortgage Choice, Australia's largest independently-operated mortgage broker.

In October, 22% of all new home loans taken out by new borrowers were for fixed rates, which is just above the 12-month average of 21%.

Company spokesperson Belinda Williamson said, “Following speculation last month of fewer rate cuts to come this year, and the latest CPI data hinting at less rate activity, it comes as no surprise that borrowers are taking advantage of the good fixed rate loan offers available. By securing their interest rate they are also locking in peace of mind over the next few years.”

“Despite the increased demand for fixed rate loans, lenders are still discounting their rates to attract new customers. Over the past week, we have seen seven lenders on our lender panel drop their fixed rate loans across a range of fixed rate terms.

“Further analysis shows that by far the most popular fixed rate loan term is three years, at 74% of new loans taken out in October. This is followed by two-year fixed rate term loans at 16% of new loans, and five and one year-fixed rate terms at 5% of approved loans, respectively.”

October also saw a considerable uplift in the preference for ongoing discount rates loans, reaching 40% of all new loans approved. This follows two consecutive monthly drops in demand in August and September.

“There was a downward trend on the popularity of discount rates loans – where the loan is discounted over the entire loan term – in the months before October, as economists were predicting a number of rate cuts by the Reserve Bank before the end of the year,” said Ms Williamson.

“This month appeared to buck this trend however, as we saw an increase in ongoing discount rate loan appeal. As the talk of further rate cuts dries up, this increase shows more borrowers are now shopping around for long-term bargains.”

Standard variable rate loan demand fell by three percentage points to 15% of all new loan approvals, while the preference for basic variable rates remained steady at 19%. At the same time, line of credit loan appeal fell by one percentage point to 3% and introductory rate popularity remained at less than one percent.

Note: Mortgage Choice currently writes almost one in every 20 new home loans in Australia, equating to approx. $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 20 year old mortgage broker has a loan book of over $45 billion.

For further information or to arrange an interview, please contact:

Belinda Williamson  
Mortgage Choice Corporate Affairs 
02 8907 0472 / 0407 416 124 
belinda.williamson@mortgagechoice.com.au  

Alicia Eu
BlueChip Communication
02 9018 8603 / 0412 552 004
alicia@bluechipcommunication.com.au 


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