Data shows a huge shift towards variable rate mortgages as interest rates fall
Borrowers are doing themselves a “disservice” by not haggling for better interest rates, but this is where brokers are encouraged to step in and negotiate.
Variable interest rates are incredibly low at the moment, which means it is a prime time for borrowers to refinance. Data also shows that borrowers are aware of the great deals, with the demand for fixed rates dropping to its lowest level in eight year.
Mortgage Choice’s home loan approval data showed that fixed rate loans accounted for 21% of all loans written in June, which CEO Susan Mitchell said was not surprising.
Last week alone, the shift towards variable loans was even more prominent; they accounted for 86.5% of loans written, with fixed rate loans making up the remaining 13.5%.
“What is truly shocking about this data is that demand for fixed rate loans has not been this low in almost eight years,” said Mitchell.
Where is the demand for variable rates coming from?
The June approval data revealed that variable rate demand was highest in Victoria, where 86% of borrowers opted for this type of product. This was followed by South Australia (82%), Western Australia (79%) and Queensland (77%). Borrowers in New South Wales were the least likely to apply for a variable rate home loan with 76% choosing this type of product.
Mitchell said, “Both the weekly and monthly data indicates that borrowers know there are great deals to be had. Indeed, the high level of demand for variable rate loans with an ongoing discount reveals that many of our customers are receiving a discount on packaged home loans beyond what lenders are offering. This increase in demand is a combination of our brokers negotiating a better rate with lenders and customers actively asking for a better rate.
“With such great deals to be had, it would be a shame for any borrower to be complacent when it came to the interest rate they’re paying on their loan. For most of us, our home loan is our most significant debt, so you are really doing yourself a disservice by being afraid to haggle.”
Will this continue?
Mitchell said that she expects rates to continue being this low, as lenders on its panel are now dropping their fixed rates.
According to Canstar’s latest interest rate update, over the last week there has been 436 fixed interest rate cuts and 329 variable rate cuts.
The lowest fixed rate on the market is currently 2.79%, offered by Greater Bank.
