Borrowers fixated on rate cuts, flexibility and features:
Variable interest rate home loans continue to dominate the new loan approval market, presumably as borrowers bank on further rate cuts, according to national figures from Mortgage Choice.
Demand for variable rate loans reached a six-month high in January, accounting for 83.65% of the company’s new home loan approvals. Consequently, demand for fixed rate loans slipped, for the second consecutive month, to 16.35% of newly approved loans.
Local Mortgage Choice mortgage broker, Melissa Jackson said, “For two consecutive months now borrowers have fled from fixed rate loans and have instead opted for variable rates. This is the first occasion since July 2012 that demand for variable rates has been this high.”
“These results come at a time when cash rate cuts from the Reserve Bank are still on the cards. There is now also the possibility of out-of-cycle variable rate cuts from lenders thanks to recent news of eased funding costs. In any case, I would expect to see any future rate cuts passed on in full to borrowers.”
Commenting on borrowers variable rate product preferences, Melissa said, “Ongoing discount rate loans remained the top variable rate product for new borrowers, at 41.43% of approvals in January.”
“The closest contender to follow was standard variable rates, with demand for this loan type rising by 3.83 percentage points to reach 20.61%, at the same time interest in basic variable rate loans remained relatively steady at 17.90%.
“This suggests that there is an increase in borrowers who prefer to pay more in return for the extra flexibility and features offered by standard variable rate loans. Keep in mind that borrowers who have a large loan amount are likely to qualify for ongoing discount rate loans or may be able to negotiate a discount off their standard variable rate. I can help you look into whether you’re eligible for such offers.
“With variable loan demand reaching a six-month high of almost 84% of approvals, it appears Australians are confident that rates will remain at very low levels for some time yet.”
Demand for line of credit loans fell by 0.5 percentage points to 2.76%, while introductory rates remained steady at 0.95%.
Note: Mortgage Choice 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 20 year old mortgage broker has a loan book of over $45 billion.
Visit Melissa Jackson’s website at www.mortgagechoice.com.au/melissa.jackson or call 0405 315 227.
For further information or to arrange an interview, please contact:
0405 315 227
About Mortgage Choice
Mortgage Choice has sourced a home loan for well over 350,000 people since 1992. It works with all manner of property finance borrowers via hundreds of franchises.
The company writes almost one in every 20 home loans in Australia by providing professional guidance on, and choice of, products offered by an extensive panel of leading lenders. Many of its brokers provide a broader service, helping customers source commercial and personal loans, asset finance, deposit bonds and providing referrals for risk and general insurances.
Uniquely, Mortgage Choice pays its franchisees the same commission rate for home loans they write, regardless of rate paid by the lender a new customer selects, working in the customer’s best interests to tailor a solution to them.
The company has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).
Recent recognition: 2012, 2011 Australian Broking Awards Major Brokerage of the Year – Franchise; 2012 Australian Broking Awards Best Training and Education; 2012 Australian Broking Awards Best Ethical/Social Responsibility Program; No.1 on The Adviser magazine’s 2012, 2011, 2010 and 2009 Top 25 Brokerages list; 2012, 2010, 2009, 2008, 2006 and 2005 MFAA Awards Retail Aggregator/Originator of the Year; 2011, 2010, 2009 and 2008 10 Thousand FEET Top 10 Franchise list; 2010 Forbes Asia-Pacific Best Under A Billion list.
Mortgage Choice holds an Australian Credit Licence: no. 382869, issued by ASIC.
Visit www.mortgagechoice.com.au or call customer service on 13 MORTGAGE.