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Property buyers continue to choose variable rate home loan products, shown by the fall in demand for fixed rate home loans for the eighth consecutive month, new data from Mortgage Choice has revealed.
According to the company’s latest national home loan approval data, variable rate home loans accounted for over 82 per cent of all home loans written throughout May 2018, up by over 2.0 per cent from the month prior, and almost 7.0 per cent higher than the 12-month average.
Mortgage Choice CEO Susan Mitchell said that this trend will continue as borrowers develop apathy towards the RBA’s stagnant cash rate.
“Indeed, we continue to see borrowers opt for the flexible nature of variable rate home loans which may offer a redraw facility, offset accounts and the ability to make extra repayments. These features are not typically associated with fixed rate loans.
“While a fixed rate product provides repayment certainty, variable home loan rates have been relatively stable for a prolonged period of time, giving borrowers little incentive to fix.”
This week’s Housing Finance data from the Australian Bureau of Statistics found that 52,116 home loans were approved throughout April, down by 1.4 per cent from the previous month.
Ms Mitchell said that she was unsurprised that the value of investment loans dipped, falling by 0.9 of a percentage point to $10.7 billion in April.
She said that this could reflect tighter lending standards and serviceability policies.
“However, May data may show an increase in investment loans following APRA lifting the cap on investor loan growth at the end of April,” Ms Mitchell said.
Ms Mitchell also noted that the number of first home buyer commitments as a percentage of total owner-occupied housing finance commitments rose to 17.6 per cent in April 2018, from 13.7 per cent in January 2018.
“This increase is significant and first home buyers seem to be propping up the market,” the CEO said.
Ms Mitchell said that she was expecting home loan demand to be maintained “[due to] a combination of factors, such as historically low interest rates, easing property prices and access to FHOGs”.
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