July 10, 2012
The percentage of new borrowers choosing variable rate home loans rose in June for the third consecutive month as rate cuts hit home, according to national loan approval data from Australia's largest independently-operated mortgage broker, Mortgage Choice.
Borrowers have taken advantage of lenders' recent rate cut offers by flocking to variable rate loans, with demand for this loan type rising by three percentage points to 82% of all new home loan approvals last month. This is the highest level recorded in nine months.
The biggest increase in variable rate loan approvals was in WA, which saw the popularity rise by seven percentage points, to reach 86% of all new loans. This was followed by QLD (up six percentage points, to 80%), VIC (up two percentage points, to 88%) and NSW (up two percentage points, to 79%). SA was the only state to reverse the trend with popularity of variable rate loans slipping by six percentage points, to 78%.
Company spokesperson Belinda Williamson said, “The end of the financial year brought with it an air of optimism around the direction of interest rates as a growing number of home loan borrowers, more than one in four, chose variable rates. Perhaps whispers of one more rate cut in coming months is wielding influence.”
“Borrowers may be incentivised by the cost gap between some variable and fixed rates.
“Our extensive lender panel, which consists of major and smaller banks, non-bank lenders, credit unions and building societies, currently has an average three-year fixed rate loan at 6.22%. In comparison, the average standard variable rate is 6.79%.
“However, it is possible for borrowers to negotiate a discount on their standard variable interest rate - to below 6% in some instances. The majority of our new borrowers were taking up this loan option in June.
“Ongoing discount rate loans, where the variable rate is negotiated to a reduced amount over the loan term usually in return for an annual fee, remained the loan of choice, accounting for two fifths of all new home loan approvals last month.
“It goes to show there are competitive deals on offer for new borrowers as well as those looking to refinance. The tip is to work with a reputable mortgage broker who has a large lender panel and explore your loan options thoroughly. If you don't, you could be robbing yourself of savings!”
The second most popular loan type for June was basic variable rate, at 19.1%, closely followed by standard variable rate, at 18.6%. The popularity of line of credit home loans rose by just over one percentage point to 3.8% of approvals and borrowers' preference for introductory rate loans remained below 1%.
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 19 year old mortgage broker has a loan book of over $42 billion.
For further information or to arrange an interview, please contact:
Mortgage Choice Corporate Affairs
02 8907 0472 / 0407 416 124
02 9018 8608 / 0404 381 886