Variable loans still the favourite flavour

Fixed rate loan demand hit its highest level since July 2008 at 8% of all loan approvals in June 2009 for Mortgage Choice, Australia’s largest independently-owned mortgage broker.

However, variable rate loans remained very much the favourites at 86% of all loan approvals. Demand here has been tracking at over 80% since August 2008.

Basic variable loans were the most popular type of loan in Australia, at 47% of all loan approvals. This is quite some way front of the 12-month average of 42%.

Demand for standard variable loans, many of which are professional packages (where eligible customers with a loan worth over $150,000 can receive discounts on the interest rate along with other professional package features), rose to 40%.

“Despite rising interest rates on fixed term home loans and talk of variable rates staying low for many months yet, demand for fixing has increased over three consecutive months now,” said Mortgage Choice senior corporate affairs manager Kristy Sheppard.

“Although only 8% of all approvals for June were for fixed loans, it looks like we are over the downward trend seen during much of last year. NSW residents were the most eager to fix their loan term, with fixed loans accounting for 12% of loan approvals.

“Basic variable loans dropped in popularity, but by only two percentage points and remained high at 47% of all approvals. It is the sixth month in a row that they have led with the highest level of demand. Historically, standard variable loans are usually the most popular loan type due to their flexibility.

“Standard variable loan demand did increase in June, though only by one percentage point to 40%. It hasn’t quite returned to the 12-month average of 45%.”

Uptake of line of credit loans (generally popular with property investors) increased slightly to 6% of all approvals, comparing to a 12-month average of 8%.