Borrowers reject fixed rates for variable

Variable rate home loans are attracting more interest from new borrowers than they have since October last year as borrowers reject fixed rates said Mortgage Choice spokesperson Kristy Sheppard.

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.

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.

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%.

Source: Mortgage Choice