Australian Property News

Demand increases for variable rates

Posted on Tuesday, April 05 2011 at 4:41 PM

An increasing number of borrowers are opting to choose variable rates, thanks to strong competitive tension between mortgage lenders and cash rate stability, according to Mortgage Choice.

Mortgage Choice spokesperson Kristy Sheppard says variable rates have reached a five-month high, with 90 per cent of borrowers choosing the option.

"Despite a number of lenders adjusting their fixed rates downwards to better align themselves with peers, variable rate home loans are attracting more interest from new borrowers than they have since October last year," Sheppard says.

"Ongoing discount and introductory rate home loans experienced the largest increase in new borrower commitments last month, accounting for 25 per cent and four per cent of our loan approvals.

"A widening array of special lender offers such as variable interest rate and loyalty discounts, higher maximum loan-to-value ratios and payments of various switching and establishment costs are deterring a growing proportion of new borrowers from taking up fixed interest rate home loans."

Demand for line of credit home loans has also increased to 5.3 per cent (from 5.1 per cent) while introductory rate home loans accounted for 4.4 per cent, up from 0.9 per cent.