The comfort factor for borrowers choosing a variable rate mortgage over a fixed rate is increasing as the Reserve Bank of Australia indicates that the official cash rate could stay on hold for some time.
Variable rate home loans have increased by 1.35% to 73.92% for all home loans written for February, according to the latest home loan approval figures from Mortgage Choice.
This indicates that borrowers are becoming more confident in variable rate products, and less inclined to fix their mortgage in the current low rate environment, despite the demand for fixed rates still being at historically high levels.
The RBA board made it clear that as long as the economy continues to move with expectations, then they intended on keeping the official cash rate on hold in “a period of stability” for a prolonged period.
It’s not surprising then to see an increased number of clients taking out variable rate home loans, as the threat of rate rises in the immediate future has stalled somewhat.
Mortgage Choice indicated that “ongoing discount variable rates continue to prove the most popular with borrowers, with this type of loan accounting for 40.94% of all home loans written throughout February”.
Across the country however, it seems Queensland is taking it’s time to drift back to variable rates. Queenslanders were still highly demanding fixed rates in February, with 33.13% of all loans written being fixed and 66.87% as variable, according to Mortgage Choice.
Compared with the rest of Australia, this puts Queenslanders as the state with the most evenly split demand for loan type.
For Mortgage Choice, of all loans written for the month of February variable v’s fixed loan type was:
- Victoria: 82.53% variable / 17.47% fixed
- Western Australia: 80.53% Variable / 19.47% fixed
- New South Wales: 74.02% variable / 25.98% fixed
- South Australia: 72.36% variable / 27.64% fixed
- Queensland: 66.87% variable / 33.13% fixed
That said, fixed rates continue to sit at historically high levels – accounting for 26.08% of all loans written across the country last month, despite the demand for variable rate products growing in all states bar South Australia and Queensland.
Stuart’s comments on the matter; “There is no denying that Australia’s lenders are competing aggressively for market share at the moment. They are offering incredibly competitive fixed and variable interest rates as well as other borrower incentives. With this in mind, it is fair to say that now may be a great time to be a home buyer.”
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(Image courtesy of http://pixabay.com/en/game-chance-red-scrabble-259109/ as at 06/03/2014)