Mortgage Choice CEO John Flavell says more borrowers are choosing a variable rate mortgage after the Reserve Bank cut rates in May.
According to Mortgage Choice’s latest national home loan approval data, fixed rate home loans accounted for 23.89 per cent of all loans written in June, down 0.52 per cent on the month prior.
Mr Flavell said the Reserve Bank of Australia’s decision to cut the cash rate in May was continuing to encourage borrowers into variable rate home loans.
“After the May rate cut, we have seen an increasing number of borrowers flocking to variable rate products,” he said.
“It is clear Australians want to take full advantage of the current low rate environment. And as speculation about another rate cut this year continues to grow, I would expect variable rate demand to strengthen further.”
Mr Flavell said while an increasing number of borrowers were opting for variable rate home loans, many lenders were proactively trimming the interest on fixed rate products.
“In recent weeks, we have seen a number of lenders slash the interest rates across their suite of fixed rate home loans. As a result, these products are now very sharply priced,” he said.
“That said, it is fair to say interest rates are very low across the board. So, regardless of whether a borrower takes out a variable rate or fixed rate mortgage, they can be assured of securing themselves a competitive interest rate.”
Across the country, variable rate demand was highest in Victoria, accounting for 86.35 per cent of all home loans written throughout June.
South Australia was not far behind, with variable rates accounting for 84.00 per cent of all loans written.
Demand for variable rate home loans was lowest in Western Australia, making up 73.36 per cent of all loans written.
Of the different variable rates on offer, ongoing discount products continued to prove the most popular with borrowers, making up 48.98 per cent of all loans written in June.
[Related: ING Direct cuts rates for investors]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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