March 02, 2015
With the Reserve Bank of Australia cutting the cash rate last month, it would seem an increasing number of borrowers are choosing variable rate home loans.
According to the latest national home loan approval data from Mortgage Choice, variable rate home loans accounted for 80.44% of all loans written throughout February – up from 79.45% the month before.
Of the variable rate products available, ongoing discount products proved the most popular amongst borrowers, with this type of home loan accounting for 42.15% of all loans written last month.
Mortgage Choice spokesperson Jessica Darnbrough said it was unsurprising to see a growing number of borrowers opting for a variable rate home loan given the amount of rate speculation.
“Last month, the Reserve Bank of Australia decided to cut the official cash rate to the historical low of 2.25%. Following the Board's decision to cut the cash rate, most of Australia's lenders were quick to follow suit, slashing up to 30 basis points from their respective standard variable rates,” she said.
“On top of that, speculation continues to mount that the Reserve Bank will look to cut the cash rate again in the not-too-distant future, which could cause home loan rates to fall even further. As such, it is unsurprising to see an increasing number of borrowers opting for a variable rate home loan, as they look to take advantage of the falling rate environment.”
Ms Darnbrough said in the last 12 months, demand for fixed rate home loans has fallen considerably.
“In December 2013, fixed rate demand peaked at 33.06%, while today this type of home loan accounts for just 19.56% of all loans written.
“While fixed rate pricing has dropped dramatically across the board in recent months, it seems borrowers are more comfortable taking out a variable rate mortgage,” she said.
Across the country, variable rates were most popular in Victoria, with this type of home loan accounting for 88.00% of all loans written. South Australia and Western Australia were not far behind, with variable rates accounting for 86.06% and 80.79% respectively.
On the flipside, demand for variable rate mortgages was lowest in Queensland, with this type of product accounting for 76.83% of all loans written within the state last month.
“Regardless of whether a borrower opts for a fixed or variable rate product, they can be assured of securing a very competitive rate,” Ms Darnbrough said.
For archived copies of the Homeloan Choices bulletin, please click here.