Western Australian borrowers are going back to basics when choosing a loan to finance property, with basic variable loans surging 2 percentage points to 36 per cent and variable loans representing 80 per cent of all loan approvals.
According to Mortgage Choice loan data for November, fixed rate loan demand fell marginally to 2 per cent, the lowest level since Mortgage Choice started its loan product reporting in February 2003.
Standard variable home loan demand in November had fallen 3 percentage points to 43 per cent of all approvals in WA, bringing figures more in line with the 12-month average of 38 per cent.
"Borrowers really are favouring the basics - fewer features in return for a lower interest rate - when it comes to choosing their home loan," Mortgage Choice senior corporate affairs manager Kristy Sheppard said.
"The continued popularity of variable loans indicates borrowers were encouraged by the Reserve Bank of Australia's decision to reduce cash rate by 100 basis points in November.
"Basic variable loans are getting closer to being the loan of choice, at 36% of all our loan approvals for Western Australia.
"Although standard variable loan demand fell to 43% in November, it is still high when compared to the 26% it was 12 months beforehand. We find the 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.
"In recent months, West Australians' love affair with fixed rate loans has dropped significantly. In November 2007 fixed rate loans were the loans of choice for 34% of West Australian borrowers but by November 2008 this figure had dived to below 2%.
"Despite interest rate reductions on fixed products, borrowers are less likely to choose them at present because of further speculation on rate cuts.
"Given expectations around further rate decreases in the New Year and softened housing prices in many areas, we appear to be facing 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, rose 3 percentage points in WA to 17 per cent of all loan approvals and the highest level of all states and territories. This was almost on par with the 12-month average of 16 per cent.
