Buyers snub fixed rates
Strong competition between mortgage lenders and ongoing interest rate stability is enticing an increasing number of investors and home buyers to take up a variable rate on their mortgage.
According to Mortgage Choice take up of variable rate home loans reached a five month high in March of 90 per cent 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 Mortgage Choice spokesperson Kristy Sheppard.
“Ongoing discount and introductory rate home loans experienced the largest increase in new borrower commitments last month, accounting for 25 per cent and 4 per cent of our loan approvals.”
Ms Sheppard said a widening array of special offers such as variable interest rate and loyalty discounts, higher maximum LVRs (loan to valuation ratios) and payments of various switching and establishment costs were 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.”