Variable loans continue to dominate market

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Recent cuts to fixed rate loan interest rates have not loosened the stranglehold variable rate product hold on the mortgage market.

Figures from Mortgage Choice indicate that, while demand for fixed rate loans increased in August, it only increased from 2% to 2.7% of the market – while variable products account for the remaining 97.3%.

Standard and basic variable loans accounted for the lion's share of loans settled by Mortgage Choice in August, with 49.6% and 42.6% of the market respectively. Line of credit loans rose to 4.6% of approvals in August, up from 3.9% the previous month.

Mortgage Choice senior corporate affairs manager Kristy Sheppard said the slight increase is "probably due to two factors".

"Talk of lenders planning to increase mortgage interest rates outside of the Reserve Bank's cash rate cycle has been escalating in the past couple of months and I'm guessing that has had some impact on the decision making process of new home loan customers," she said. "Another strong influence would be the relatively small distance between interest rates on a number of fixed and variable home loans."

She attributed the popularity of standard variable loans to the feature-filled professional packages attached to many of them.

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