North Sydney, Nsw Australia (PressExposure) April 11, 2011 -- Strong competitive tension between mortgage lenders and ongoing cash rate stability is enticing an increasing majority of new home loan borrowers to take up a variable rate.
According to Mortgage Choice, Australia's largest independently-owned mortgage broker, this loan category reached a five-month high in March of 90% of its new loan approvals nationally.
"Despite a number of lenders adjusting their fixed rates downwards to better align themselves with peers, variable rate home loans are attracting more interest from new borrowers than they have since October last year," said company spokesperson Kristy Sheppard.
"Ongoing discount and introductory rate home loans experienced the largest increase in new borrower commitments last month, accounting for 25% and 4% of our loan approvals.
"A widening array of special lender offers such as variable interest rate and loyalty discounts, higher maximum LVRs and payments of various switching and establishment costs are deterring a growing proportion of new borrowers from taking up fixed interest rate home loans.
"This loan type saw a steady rise in demand during the six months to January but over the last two months this trend reversed. People are either more confident of cash rate stability, more confident of their ability to ride predicted interest rate hikes or they have weighed up the pros and cons of going with variable over fixed and decided the benefits are worth any risks.
"They may also be encouraged by a number of lenders removing their exit fees, which means many borrowers will find it easier to switch loans if they get into strife or find a better deal later."
Regardless, standard variable home loans still ranked number one despite demand falling four percentage points in March to 30% of loan approvals. Ongoing discount home loans (where the rate is discounted over the entire loan term usually in return for an annual fee) finally overtook basic variable loans for second position, at just over 25% and just under 25% respectively.
Demand for line of credit home loans - often popular with investors - remained relatively steady at 5% while introductory rate home loans accounted for a solid 4%, up from 1%.