More borrowers locking in interest rates: Mortgage Choice
On the back of the majority of lenders cutting their fixed rate mortgages over the past few months, the popularity of fixed rates has soared to a three-and-a-half year high, according to October approval figures from mortgage broker Mortgage Choice.
In October, nearly 20% of borrowers took out a fixed-rate mortgage product, up from 17% in September and significantly higher than the 12-month average of 13.5%.
Fixed-rate mortgages are now more popular than the traditionally popular “no frills” basic variable loan and the more feature-rich standard variable loan, which were each selected by about 15% of borrowers.
Ongoing discount mortgages, where the rate is discounted over the life of the loan in return for an annual fee, remain by far the most popular product choice (43% of approvals), but their popularity declined slightly in October.
Source: Mortgage Choice
Basic variable rates were the most popular with new home loan borrowers only 11 months ago. At that time, the product type accounted for 34% of the broker’s new approvals.
Today, this sits at less than 16%, the second lowest point since Mortgage Choice began recording such data in January 2003.
According to mortgage comparison website Ratecity.com.au, 70% of lenders, including St George, Westpac, Greater Building Society, Credit Union Australia and ING, have cut their fixed mortgage rates recently.
Company spokeswoman Kristy Sheppard says comparing October 2011 loan approval data with that extracted one year ago shows “how much the industry has changed in reacting to subdued housing finance demand and a relatively positive interest rate outlook”.
“Then, basic variable rate was the loan of choice at just over 34% of approvals. Standard variable rate followed with just under 34%, then ongoing discount rate at 17% and fixed rate at 11%.
“That situation has now flipped. New borrowers’ appetite for fixed rate loans is at a three and a half year high of 20% of approvals and ongoing discount rate loans account for 43% of approvals.
“In an environment of rising living costs and economic uncertainty it is unsurprising borrowers are taking advantage of the relatively low fixed rates and attractive variable rate discounts offered by lenders hungry for business,” she says.
The popularity of standard variable, line of credit (popular with investors) and introductory rate home loans all fell in October, to 15%, 4% and 1% of approvals respectively.