Almost half of borrowers choosing discounted mortgages

Borrowers’ appetite for discounted variable rate mortgages among borrowers is growing, according to September approval figures from Mortgage Choice. 

Nearly 45% of borrowers selected a discounted rate mortgage in September, up from 41% in August and significantly up on the 12-month average of 30% of borrowers. 

The Mortgage Choice website says that “one of the most prominent lenders” on its panel of lenders is offering a discount of up to 1.03% per annum off its advertised rate throughout the life of the loan, depending on how much of a deposit the borrower can muster. 

To qualify for these discounts, the total borrowing has to be $250,000 or greater and the loan-to-valuation ratio is to be less than or equal to 80%. 

For LVRs greater than 80%, the unnamed lender is offering discount of 0.7% off the advertised rate while for LVR between 70% and 80%, a discount of 0.84% is applicable. In addition the lender is also waiving a $600 establishment fee with the discounts on offer extended to November 20. 

According to the latest JP Morgan/Fujitsu Mortgage Industry Report, the current rate of discounting by the major banks is unsustainable in an environment of low housing credit growth. 

In addition to opting for ongoing discounted mortgages, more borrowers are opting for fixed-rate mortgages as lenders continue to cut fixed mortgage rates.

During September, the percentage of fixed-rate borrowers increased to 17% from just under 14% of borrowers in August. The long-term average is 12.5%.

Source: Mortgage Choice

Mortgage Choice spokeswoman Kristy Sheppard says she expect the trend of borrowers opting for ongoing discounted mortgages to continue, “bolstered by industry talk swinging away from cash rate hikes to ongoing stability or cuts”. 

Demand for standard variable and basic variable rate home loans fell in September, to 16% and 15% of approvals, as did that for introductory rate loans, to 2%. 

Line of credit mortgages, primarily used by investors, experienced a slight growth in demand, to 5%.