Variable loans still hold their ground

According to the most recent market surveys, new home buyers are still choosing standard variable rate loans over fixed rate loans in spite of recent reserve bank interest rate hikes. Due largely to the large discounts offered through professionally packaged loans, loans with some form of interest rate flexibility have proven most popular with investors over the past two years. Fixed rate home loans only account for approximately 25% of all home loans approved since November 2005.

What does this mean? Well... .it certainly suggests that in addition to the appeal of discounted variable loans, home loan applicants are not as concerned about rising interest rates as the media would have you believe. Furthermore, it's not just the loan applicants that feel this way.

"While rates are going up in the short term, I suspect that in two years' time they're going to start coming down again, so people shouldn't lock themselves in beyond that point" said Saul Eslake, ANZ chief economist.

This also ties in with the views of John Edwards, HSBC Chief Economist. He says the RBA are "quite neutral" on the prospect of further rate rises. He also states that "they also make the point that this is the eighth increase in a row and previous increases are beginning to have an impact".

For all of you budding home owners out there, this is good news!!

Published on June 6-th, 2007 in Personal Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.