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Home buyers opt for optimistic variable rate mortgages

14 September 2018 Tim Neary
Home buyers, variable rate mortgages

While the markets might be beset with change, home buyers are sticking to the tried and tested, remaining optimistic that the current low-rate landscape will continue its record run, according to new data from a leading mortgage broker.

According to Mortgage Choice’s latest national home loan approval data, variable rate home loans accounted for over 82 per cent of all mortgages written throughout August 2018, an increase of 0.37 of a percentage point from the month prior and almost 4 per cent higher than the 12-month average.

CEO Susan Mitchell said that borrowers have enjoyed a sustained period of record low variable rates.

“August’s national home loan approval data shows that borrowers have continued to opt for variable loans. However, with three major lenders announcing rate hikes in the last two weeks, this could incentivise borrowers to fix,” Ms Mitchell said.


Across the country and for the eighth consecutive month, variable rate demand was the highest in Victoria, with 87.21 per cent of borrowers opting for this type of home loan.

This was followed by South Australia, where 86.68 per cent of borrowers chose a variable rate mortgage.

Once again, the monthly data showed that borrowers in New South Wales were the most likely to choose a fixed rate loan product, with over 21 per cent of borrowers opting for this type of product.

Ms Mitchell said that this was unsurprising considering recent data.

“According to CoreLogic’s Housing Affordability Report for the June quarter, Sydney was the nation’s least affordable housing market across three purchasing metrics,” the CEO added.

“Moreover, the report showed that affordability in regional NSW has also deteriorated.”

Ms Mitchell also said that the recent rate increases have predominantly affected investors and interest-only borrowers.

“As investors retreated from the market, variable rate home loan products dominated as the preferred product among owner-occupier borrowers who make up the biggest part of mortgage demand.

“However, in the last couple of weeks, three out of the four major lenders announced they would be lifting the interest rates charged on their variable rate loan products due to higher wholesale funding costs.

“These cost increases will impact owner-occupiers and borrowers who may have been comfortable to ride the variable rate wave, [and who] may now look to fix their interest rate in order to protect themselves against further rate rises.”

Home buyers opt for optimistic variable rate mortgages
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