With the Reserve Bank of Australia (RBA) predicted to make further cuts to the official cash rate in the near future
, Australian borrowers are seemingly growing in belief that any rate reduction will be passed on by lenders.
Variable rate loans are currently growing in popularity among borrowers, with figures from mortgage broking network Mortgage Choice revealing fixed rate loans accounted for 23.89% of all loans written during June, a 0.52% decrease compared to May.
Mortgage Choice chief executive officer John Flavell said the figures show Australians were quick to act following the RBA lowering the cash rate in May.
“After the May rate cut, we have seen an increasing number of borrowers flocking to variable rate products,” Flavell said.
“It is clear Australians want to take full advantage of the current low rate environment. And as speculation about another rate cut this year continues to grow, I would expect variable rate demand to strengthen further,” he said.
While Flavell predicts variable rate loans will command an even bigger share of the market through 2016, recent moves by lenders mean those borrowers who stick with fixed rate options are likely to benefit as well.
“In recent weeks, we have seen a number of lenders slash the interest rates across their suite of fixed rate home loans. As a result, these products are now very sharply priced,” he said.
“That said it is fair to say interest rates are very low across the board. So, regardless of whether a borrower takes out a variable rate or fixed rate mortgage, they can be assured of securing themselves a competitive interest rate.”
Demand for variable rate loans was at its highest in Victoria during June, accounting 86.35% of all loans written during the month.
That was followed by South Australia, where variable rate loans accounted for 84% of June’s loans.
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