November 01, 2011
Basic variable rates were the most popular with new home loan borrowers only 11 months ago, but today they have been far surpassed by ongoing discount rates and fixed rates, according to loan approval data from Mortgage Choice, Australia's largest independently-owned mortgage broker.
At that time, the no-frills product type accounted for 34% of the broker's new approvals. Today, this sits at less than 16%, the second lowest point since Mortgage Choice began recording such data in January 2003.
Fixed rates are now more in demand than they have been in well over three years, and although the popularity of ongoing discount rates dropped for the first time in October they remain by far the most popular home loan with new borrowers, accounting for more than 43% of approvals.
Company spokesperson Kristy Sheppard said, "When comparing our October loan approval data to that extracted one year ago, it's remarkably obvious how much the industry has changed in reacting to subdued housing finance demand and a relatively positive interest rate outlook."
"Then, basic variable rate was the loan of choice at just over 34% of approvals. Standard variable rate followed with just under 34%, then ongoing discount rate at 17% and fixed rate at 11%.
"That situation has now flipped. New borrowers' appetite for fixed rate loans is at a three and a half year high of 20% of approvals and ongoing discount rate loans account for 43% of approvals.
"In an environment of rising living costs and economic uncertainty it is unsurprising borrowers are taking advantage of the relatively low fixed rates and attractive variable rate discounts offered by lenders hungry for business."
The popularity of standard variable, line of credit and introductory rate home loans all fell in October, to 15%, 4% and 1% of approvals respectively. Basic variable demand rose slightly to 16%.
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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