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Interest in fixed rates drops

Posted on August 11, 2008, 5:05pm
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The demand by South Australian borrowers for basic variable rate loans in July rose to 41pc of all approvals, the highest level in over four years.

At the same time only 12pc of all approvals were for fixed rate loans, the July 2008 Mortgage Choice housing loan approval data revealed.

“The mortgage landscape has changed dramatically since January when fixed rate demand was at its peak at 45pc of all approvals but now it stands at 12pc in South Australia, while basic variable loan demand was 14pc at that time and is now 41pc,” Mortgage Choice national corporate affairs manager Warren O’Rourke said.

“With home loan borrowers carefully looking at rate it is not surprising that the cheapest of the product categories is experiencing growth.

“Of particular interest to home loan borrowers, was the recent indication by the Reserve Bank of Australia that there is scope to move towards a less restrictive stance on monetary policy which should be good news for mortgage interest rates.

“Considering that the supply/demand curve is indicating house prices are under pressure and, the national rental vacancy rate remains historically low, it is a positive outlook for consumers of housing, both owner occupied and investment.”

Mr O’Rourke said demand for basic variable loans in South Australia rose dramatically to 41pc of all approvals.

This was highest they have been for over four years and significantly higher than the 12-month average of 26pc.

“Standard variable home loan demand decreased to 37pc of all loan approvals in South Australia but is still higher than the 12-month average of 36pc,” he said.

“This is in spite of the fact that a number of lenders have increased their variable interest rates independent of the Reserve Bank of Australia cash rate cycle.

“Demand for this category of loan is very much driven by the discounts offered by many lenders when the loan is $150,000 or more.

“Demand for fixed rate loans fell to historically low levels in July to 12pc, down from 18pc in June and slightly higher than the national average of 11pc.

“Of note was Western Australia, which set the pace with only 7pc of all approvals in this category down from 20pc in June. This trend also confirms the view held by many borrowers, that interest rates are nearing the top of the cycle.”

Housing loan trends South Australia

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