Borrowers shun fixed rates

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The popularity of fixed rates continues to dwindle, according to Mortgage Choice.

The brokerage’s October 2009 data shows fixed rate loans now account for less than 3 per cent of all new loan approvals, while the demand for variable rate loans has risen by two percentage points to 97 per cent.

Fixed rate products have accounted for less than 10 per cent of the company’s new loan approvals for the past 16 months, while variable rate loans have become almost exclusively the loan of choice for recent home loan borrowers.

Mortgage Choice senior corporate affairs manager Kristy Sheppard said the drop in fixed rate loans could clearly be linked to the higher pricing of the products.

“Fixed rate loan demand dropped from 5 per cent of home loan approvals in September to less than 3 per cent in October, which is unsurprising, considering fixed loans can be priced up to two percentage points higher, or more, than variable loans,” Ms Sheppard said.

According to Ms Sheppard, basic variable was the most popular loan type, accounting for 46 per cent of approvals.

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