Fixed rate home loan approvals drop to below 3%

The popularity of fixed interest rate home loans across Australia has continued to fall, according to October 2009 data from Mortgage Choice, Australia’s largest independently-owned mortgage broker. Fixed rate loans now account for less than 3% of all new loan approvals, while the demand for variable rate loans rose by two percentage points, to 97% of approvals.

Fixed rate products have accounted for less than 10% of the company’s new loan approvals for the past 16 months, while variable rate loans have become almost exclusively the loan of choice for recent home loan borrowers.
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Summerhill Financial Services

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Homebuyers are turning away from fixed-rate home loans as economists forecast interest rate cuts next year, a mortgage broking group says.

Fixed-rate home loans were snapped up by one in three borrowers in March, data from Mortgage Choice showed.

The figure was lower than February’s 37 per cent take-up and below the six-month average of 36 per cent when about 3,500 loans from 25 lenders was analysed.

Standard variable loans made up 36 per cent of mortgages in March while basic variable loans, where consumers are more restricted in their repayment options, made up 17 per cent.

Another 13 per cent opted for a credit card mortgage, while a small proportion of borrowers chose non-conforming and reverse loans.

Mortgage Choice spokeswoman Kristy Sheppard said borrowers were switching away from fixed interest loans because they were less concerned about rising interest rates and did not expect the Reserve Bank of Australia (RBA) to hike rates again in May.

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