Variable rate mortgages are vastly more popular than fixed, for the second month running. Data from Mortgage Choice shows that variable rate loan demand hit a record high, accounting for 92% of all home loan approvals in March 2009.
Fixed rate loan demand represented less than 3% of all home loan approvals.
Mortgage Choice senior corporate affairs manager, Kristy Sheppard said that while the results suggested "consumer conservatism is still thriving when it comes to home loans" there was an increase in borrowers who prefer to pay "the extra 40-odd basis points difference between the two loan types in return for extra flexibility and features, perhaps because interest rates are so low"
"Also, lenders will often provide standard variable borrowers with a rate discount, if the loan amount is $150,000 or higher," she added.
As rates have fallen steadily since September last year, home owners have increasingly opted for variable rate mortgages in the hope of more rate cuts.
But for the thousands of home owners who fixed their rate during the first half of 2008 when rates were high and climbing higher, the lower rates on offer now just remind them of how much extra they are paying each month on mortgage repayments.
Trying to get out of a fixed loan can be extremely costly. Home owners who fixed while rates were high are now paying more than 3 per cent more then those of variable rate loans. However, exit fees can reach into tens of thousands of dollars.
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