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Fixed Rates Losing Popularity

08 January 2013
2012 interest rate cuts and whispers of more to come are spurring four out of five new loan applicants to opt for variable rather than fixed loans.


National broker Mortgage Choice has released its latest home loan figures, and they show variable loans on the rise and a gradual shift from fixed rate options in most of the country.

In December 20.14% of new home loan approvals were for fixed rate loans, down from 22.37% in November and falling below the 12-month average of 21%.

Fixed rate loan popularity decreased in the majority of states by an average of 4.26 percentage points, but rose in Queensland by 4.12 percentage points.

There was a rise in demand for variable rates to 79.86% from 77.63% in November.

Ongoing discount rate loans remained the loan product of choice, adding up to 41.16% of all new loan approvals in December.  

"While fixed rate home loans continue to offer piece of mind with a steady repayment level, a variable rate home loan that has the potential to shift down in price is proving more attractive," explained Mortgage Choice spokesperson Belinda Williamson.

"In fact, four in every five new borrowers say they would opt for this type of loan."

Borrowers are also likely hedging their bets against further rate cuts early in 2013, and the chance that lenders might pass on earlier cuts in their own time.

"With further variable rate cuts still in the pipeline this new year, 2013 presents a great opportunity for borrowers who have done their homework and who have been waiting and watching to enter the property market," said Ms Williamson.

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