More borrowers choosing variable rate mortgages

More borrowers are opting for variable rate mortgages, as demand for fixed rate home loan products wanes, new data from Mortgage Choice has revealed.


May 03, 2018

More borrowers are opting for variable rate mortgages, as demand for fixed rate home loan products wanes, new data from Mortgage Choice has revealed.

According to the company’s latest national home loan approval data, variable rate home loans accounted for 80.68% of all home loans written in April 2018 - up over 2% from the previous month, and almost 6% higher than the 12-month average. 

“The data is largely unsurprising, especially when you consider that the Reserve Bank of Australia has left the cash rate on hold for over twenty months,” Mortgage Choice CEO, Susan Mitchell said. 

“Given that interest rates have been sitting at historical lows for so long now, borrowers see no urgent need to lock themselves into a fixed rate product.  

“Further, lenders continue to compete aggressively on variable interest rate pricing, giving borrowers less incentive to fix their rates.”

Across the country and for the fourth consecutive month, variable rate demand was the highest in Victoria, with 91.70% of borrowers opting for this type of mortgage. 

This was followed by South Australia where 87.99% of borrowers chose a variable rate home loan. 

Once again, borrowers in New South Wales were the least likely to choose a variable rate home loan, with 71.68% opting for this type of product. 

Looking ahead Ms Mitchell said a number of factors could influence the popularity of variable rate home loans. 

“The Reserve Bank’s decision to continue to leave the official cash rate on hold means borrowers are happy to ride the variable rate wave for now,” she said.

“That being said, speculation that the cash rate may rise as soon as springtime in 2018 means borrowers should not take a set and forget mentality when it comes to their home loan.

“Borrowers looking for home loan certainty ahead of any impending rate rises may also need to consider the possibility of banks passing on any increased costs of credit, despite the RBA official cash rate being anchored at 1.5%. 

“As such, borrowers may want to consider fixing part or all of their mortgage and those who have been in their home loan product for some time should take the time to speak to their local mortgage broker to determine if they’re still in the right product for their needs.”

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