Demand for discounted mortgages wanes as lenders pull offers: Mortgage Choice
Demand for ongoing discount rate loans has fallen as lenders pull back on offering these special deals, according to February mortgage approval figures from Mortgage Choice.
The percentage of ongoing discount rate loans fell from 46% to 42% of all new home loan approvals by Mortgage Choice brokers in February – the largest decrease since Mortgage Choice began reporting on this loan type in November 2010.
An ongoing discount rate loans is one where the interest rate is discounted over the entire loan term, usually in exchange for an annual fee.
Despite this drop, demand for this product still remains well above the 12-month average of 38%.
Fixed-rate loan demand steadied in February, at 21% of all new home loan approvals, on par with January and the six-month average, but ahead of the 12-month average of 16%.
Demand for basic variable loans rose to 17% of all approvals in February, from 14% in January while standard variable loan demand grew marginally to 16% from 15%. Line of credit loan popularity held steady at 3% and interest in introductory rate loans remained below 1%.
Source: Mortgage Choice
Commenting on the February figures, Mortgage Choice spokeswoman Belinda Williamson says lenders kicked off 2012 with a “slew of loan discounts in a bid to compete for business in a subdued housing finance market”.
“A number of these discounts were scaled back in February as lenders responded to shaky global economics and rising funding costs.
“We were surprised to find that despite lenders raising their home loan interest rates independently of the Reserve Bank during February, and ongoing concern around the direction of interest rates, our borrower data did not show any increased interest in the repayment security offered by fixed-rate loans.
“The fact that only one in five new loan customers opted for fixed-rate loans reflects that there is still a large volume of borrowers willing to ride the variable rate rollercoaster,” says Williamson.