In light of the Reserve Bank of Australia’s decision in August to cut the cash rate, a growing number of borrowers took advantage of the current low interest rate environment by choosing both standard and basic variable rate home loans, according to national new home loan approval figures from Mortgage Choice.
Basic variable rate loans amounted to 12.64% of all new home loans at Mortgage Choice during the month of August, jumping from 10.99% in July. Standard variable rate loans also saw a rise to 16.51%, up from 14.94% in July and up from 12.36% in June this year.
With the official cash rate at an all-time low after the cash rate cut in August, and talk of at least one more cut this year, borrowers appear to be taking advantage of recent sharp variable rate pricing.
This increase in demand for both basic and standard variable rate loans may be driven by borrowers seeking loan options with no annual fee, which is the case with basic and standard variable loans but not so with other loan types like ongoing discount loans.
While ongoing discount rate loans are still a popular choice for borrowers, they lost favour slightly last month, falling by 2.08 percentage points to 37.47%.
Interestingly, fixed rate demand fell for the third month in a row to reach 27.86% at a national level, but at a state level both New South Wales and Victoria saw a rise in demand for this loan type. Preferences for fixed rates in New South Wales jumped from 30.76% in July to 32.67% in August, while Victoria grew from 15.32% in July to 18.79% this month.
It seems borrowers in both New South Wales and Victoria are keen to lock in rates now rather than banking on a further official cash rate cut in the months to come. For these borrowers the security of a fixed rate home loan may be more appealing than the flexibility and features offered by variable rate loans.
To find out whether a fixed or variable rate is right for you, please call us on 9432 6070 or click on the 'contact us' tab at the top of this page.