Demand for basic variable rate home loans in July reached a historical low while discounted and standard variable rates gained market share, according to national home loan approval figures from Mortgage Choice.
Basic variable rate home loans accounted for 10.99% of all new loans approved by Mortgage Choice in July, which represents a monthly fall of 3.79 percentage points and brings demand for this loan type to the lowest level since reporting began in 2003.
The increase in preference for variable over fixed rate loans was very subdued in July. However, when drilling deeper into variable rates, we did see a significant drop in the preference for basic variable rate home loans, bringing the percentage of new loans for the ‘no frills’ product to an all time low.
At the same time there was a noticeable increase in the market share of ongoing discounted and standard variable rate loans, with many new borrowers in July favouring the benefits of a flexible loan product mixed with a great interest rate.
The number one preference in July was ongoing discount rate loans – where the interest rate is discounted over the entire loan term usually in return for an annual fee. The popularity of this loan type rose by 1.24 percentage points, to reach 39.55%.
Meanwhile, demand for standard variable rate loans – which are often packed with comprehensive features such as extra repayment options – reached a five-month high, rising by 2.58 percentage points to 14.94%.
The total percentage of variable rate home loans reached 71.84%, a rise of 0.14 of a percentage point, while fixed rate demand dropped by the equivalent amount to 28.16%.
To see the full breakdown on a state by state basis, click here.
Note: Mortgage Choice writes one in every 25 new home loans in Australia, equating to approx. $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 20 year old mortgage broker has a loan book of over $45 billion.