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ISCOVER
Staff Reporter
Demand for variable rate home loans reached an eleventh month high in July as speculation of another rate cut in coming months lingers.
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According to the latest statistics from Mortgage Choice, demand for variable rates climbed 3 per cent to sit at 85 per cent in the month of July.
Western Australia was the only state to go against the grain and report a drop in variable rate demand, which fell to 81 per cent from 86 per cent the month before.
Meanwhile, the average increase of variable rate uptake across the remaining states was a rise of 3.75 percentage points.
“The vast majority of borrowers are feeling as confident about variable interest rate movements now as they did back in August 2011, a time when borrowers had experienced nine consecutive months of steady interest rates, which was followed by rate cuts,” Mortgage Choice spokesperson Belinda Williamson said.
“Borrowers’ hopes of another rate cut in the coming months may be underpinned by the low inflation figures released last month. This might be enough for the Reserve Bank to recognise that some parts of the economy, particularly the property market, are in need of monetary stimulation.”
“But the decision won’t be made lightly. There are positive factors in our economy today and any further cuts to the cash rate may send signals to foreign investors that our economy isn’t in good shape. Such a decision will also leave the Reserve Bank with little to nothing left in the petrol tank if domestic factors or the situation in Europe deteriorate.”
Despite the ‘will they, won’t they’ debate around the cash rate in coming months, it seems borrowers are focused on getting the lowest interest rate possible. The top two variable rate loan choices in July are known for having relatively low interest rates in exchange for fewer loan features and/or an annual fee.
“Demand for ongoing discount rate loans where the variable rate is reduced usually in return for an annual fee, rose by four percentage points to 44 per cent, while interest in basic variable rate loans, which often have a low interest rate in exchange for fewer loan features, increased by one percentage point to 20 per cent of all new loans,” Ms Williamson said.
