Australian borrowers are increasingly choosing variable rate home loans ahead of all other types, with well over three quarters (84%) of all loan approvals in this category, according to the Mortgage Choice loan approval data for October 2008.
Meanwhile, fixed rate loan demand fell to less than 3%, down from 4% last month, which is the lowest level since Mortgage Choice home loan franchise commenced its loan product reporting (in February 2003).
Standard variable home loan demand in October was relatively steady at 47% of all loan approvals in Australia. Although only slightly higher than the September figure of 46%, it is much higher than the 12-month average of 39%. Basic variable loans increased to 37% of all approvals in October, up from 27% in October 2007.
Mortgage Choice Senior Corporate Affairs Manager, Kristy Sheppard said, “Fixed rate loans continue to fall out of favour with Australian borrowers. Those borrowers choosing variable loans were encouraged by the Reserve Bank’s reduction of the cash rate by 100 basis points in October. This demand should continue, following the 75 points reduction in November.
“The Australian mortgage landscape has really experienced an about-face on fixed loans. In October 2007 they were the loan of choice for 22% of borrowers but in October 2008 this figure stood at less than 3%. Despite continued interest rate reductions on fixed products, borrowers are cautious to embrace them at present because of the anticipation of further rate cuts.
“Standard variable loan demand reached 47% in October, which is a substantial increase on the 39% it was 12 months beforehand. This demonstrates how borrowers are revelling in the current environment of big interest rate cuts. We find the demand for standard variable loans is also driven by discounts offered by many lenders when the loan is $150,000 or more.
“Given the speculation of further rate cuts in December and the new year, and relatively stable or slightly falling housing prices, we appear to be facing a more positive housing affordability picture – for both first homebuyers and investors”.
Uptake of line of credit loans, which are generally popular with property investors, remained fairly steady at 11% of all loan approvals. This was in line with six months earlier and marginally ahead of the 12-month average of 10%. Line of credit was particularly popular in New South Wales and South Australia during October, at 17% and 14% of all home loans, respectively.
Mortgage Choice home equity franchise annual loan approvals exceed 40,000 nationally and therefore provide a clear insight into the product preferences of housing loan borrowers generally.
19-Nov-2008