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More borrowers opt for variable rates amid rate cut uncertainty

More borrowers opt for variable rates amid rate cut uncertainty

An increasing number of borrowers are opting to take out variable rate loans amid ongoing speculation about whether there will be another rate cut this year, new research has shown.

New figures from Mortgage Choice show that variable loans made up 82.3 per cent of all loans written in September — up from 79.7 per cent the month before.

Chief executive officer John Flavell attributed the uptick to mounting speculation that the Reserve Bank of Australia (RBA) could potentially cut the cash rate again before the end of the year.

“Borrowers are clearly hoping rates will fall further in the future and are keen to take advantage of this possibility by choosing a variable rate mortgage,” he explained.

“While future cash rates are purely speculation at the moment, it would seem the chatter has been enough to encourage more home buyers to take out a variable rate mortgage.

“Regardless of whether borrowers opt for fixed or variable rate products, they can be assured of securing a very competitive rate,” he added.

According to Mortgage Choice, variable rate demand was highest in Victoria and Tasmania, accounting for 93.4 per cent of all home loans written in September.

This was closely followed by Western Australia and Queensland, with variable rates making up 83.6 per cent and 80.1 per cent respectively.

Meanwhile, demand was lowest in NSW, with variable rate home loans accounting for 79.9 per cent of all loans written.

Earlier this month, the RBA held the interest rate at its current rate, as was widely expected, however the industry seems to be divided over where the bank will go from here.

AMP Capital chief economist Shane Oliver has previously told Mortgage Business that a rate cut in November is ‘likely’ but that “it would probably be it” for interest rate reductions for this year.

[Related: One in five mortgages now under 4%]

 

More borrowers opt for variable rates amid rate cut uncertainty
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