Variable rate demand bounces back in June

Small variable rate cuts by many of Australia’s lenders have encouraged more borrowers into this type of home loan, new research has revealed.


July 07, 2017

Small variable rate cuts by many of Australia's lenders have encouraged more borrowers into this type of home loan, new research has revealed.

According to the latest national home loan approval data from Mortgage Choice, variable rate home loans accounted for 75.06% of all mortgages written throughout the month of June – up from 73.57% the month prior.

“Over the past couple of weeks, we have seen a number of Australia's lenders trim the interest rates charged on their variable principal and interest home loan products,” Mortgage Choice chief executive officer John Flavell said.

“While most lenders have only trimmed the interest charged on their variable principal and interest mortgages by five basis points or so, these rate adjustments have clearly been strong enough to encourage borrowers to opt for a variable rate mortgage rather than a fixed rate product.”

Across the country, variable rate demand was highest in Victoria, with this type of product accounting for 83.58% of all home loans written.

South Australia wasn't far behind, with variable rate home loans accounting for 79.56% of all loans written.

At the other end of the spectrum, variable rate demand was lowest in New South Wales, with this type of product accounting for 71.69% of all loans written.

“Product demand is a mixed bag at the moment,” Mr Flavell said.

“While some borrowers are clearly happy to chase rate and take advantage of the latest round of small rate cuts, others desire the repayment security that comes with a fixed rate mortgage.

“Throughout June, fixed rate home loans accounted for 24.94% of all loans written – down from 26.43% the month prior.

“While down on the previous month, it is important to note that fixed rate demand is still relatively high by long term standards.”

Looking ahead, Mr Flavell said it was “hard to judge” what would happen with fixed rate demand.

“There is a lot of volatility in the market at the moment. In recent weeks, many of Australia's lenders have increased their interest only pricing by a considerable amount. At the same time, these lenders have shaved the interest rates charged on their principal and interest products.

“These rate adjustments clearly show that many of Australia's lenders are hungry for a particular type of business. Over the coming months, I would expect to see an increasing level of complexity and confusion in the interest rate market as lenders continue to adjust their pricing and policy in line with their business appetite.”


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