Variable rate loan demand hit a record high for the second month in a row, accounting for 92% of all Australian home loan approvals in March 2009. Apart from the month prior, this is a level unseen since Mortgage Choice began recording its loan approval data in January 2003.

According to the Australian mortgage broker, fixed rate loan demand, on the other hand, represented less than 3% of all home loan approvals.

Basic variable remained the loan of choice, at 47% of all approvals (well above the 12-month average of 36%), though this headed south by two percentage points over March.

The popularity of standard variable loans continued to rise, to 44%, up one percentage point over the month though still lower than the 12-month average of 47%.

Mortgage Choice Senior Corporate Affairs Manager, Kristy Sheppard said, “Although basic variable loans account for more approvals than standard variable loans, at 47% versus 44% of all loan approvals, the popularity of the latter rose for the second month in a row”.

“This suggests that, while consumer conservatism is still thriving when it comes to home loans, there is an increase in Australian borrowers who prefer to pay the extra 40-odd basis points difference between the two loan types in return for extra flexibility and features, perhaps because interest rates are so low. Also, lenders will often provide standard variable borrowers with a rate discount, if the loan amount is $150,000 or higher.

“Regardless, with variable loan demand remaining steady at a record 92% of approvals, it appears Australians are confident that rates will remain at very low levels for some time yet.

“Fixed rate loan uptake in Australia peaked in November 2007, at 38%. In March 2009, demand increased ever-so-slightly but remained under 3%, compared to a 12-month average of 7%. New South Wales and Victoria experienced a decrease in fixed loan popularity in March, to less than 3% and 1% respectively.

“Conditions for first-time and experienced buyers are better than they’ve been in a long time in terms of affordability. Relatively stable housing prices and very low interest rates are pushing potential purchasers to jump into the property arena sooner rather than later. Other factors such as historically low rental vacancies, higher rents and an undersupply of housing when compared to demand are also providing strong incentives for people to act”.

Uptake of line of credit loans (generally popular with property investors) in March increased slightly to 6%, comparing to a 12-month average of 9%.