Standard variable home loan demand in December fell by 6 percentage points to 39% of all approvals in Victoria, bringing figures below the 12-month average of 42%. Meanwhile, basic variable loans became more popular, up 3 percentage points to 51% for the month.
Mortgage Choice Senior Corporate Affairs Manager, Kristy Sheppard said, “When it comes to choosing a mortgage, borrowers continue to back the basics and opt for fewer features in return for a lower interest rate and, often, lower fees. Their decision to stick with variable rate loans in December was boosted by that month’s Reserve Bank decision to slice interest rates by one percentage point. Continued speculation about rate cuts in the New Year would also have contributed heavily”.
“Basic variable loans are now streets ahead of standard variable as the loan of choice, at 51% of all approvals.
“Standard variable loan demand fell to 39% in December and this figure is three percentage points below the 12-month average. We find that demand for standard variable loans is driven by discounts offered by many lenders when the loan is $150,000 or more, as well as the flexible nature of the loan interest rate.
“The uptake of fixed rate loans plateaued in February 2008, at 33%. Now, it has dived to 2%.
“Softening housing prices in many areas, along with slower property sales, decreasing interest rates and increasing rental yields indicates a more positive housing affordability picture for both first homebuyers and investors”.
Uptake of line of credit loans, which are generally popular with property investors, grew marginally from 6% to 7% of all home loan approvals in Victoria. In Western Australia, where uptake levels of line of credit loans are traditionally very strong (if not the strongest in the country), fell 3 percentage points to 11%, suggesting a weakening property investment sector.