Home buyers are flocking to variable loans in the expectation of another interest rate cut, data shows.
Mortgage Choice housing loan approval data from August shows variable loan demand is at a five year high as borrowers keenly await another cut in interest rates by the Reserve Bank of Australia (RBA).
The RBA this month lowered rates for the first time in seven years.
The data shows demand for fixed rate loans dropped to only five per cent of all approvals from 40 per cent in November 2007, Mortgage Choice corporate affairs manager Warren O'Rourke said.
"Despite interest rate reductions on fixed rate loan products, borrowers were not embracing them in any great volume following strong speculation of the September rate cut and a further rate cut before Christmas,'' Mr O'Rourke said.
"They are adopting a wait-and-see approach by favouring variable rate loans.''
Basic variable loans made up 37 per cent of approved loans in August, well above the 12-month average of 23 per cent.
Standard variable rate loans remain the most popular, despite falling slightly in August to 43 per cent of all loans.
Their popularity comes despite a number of lenders increasing their variable rates independently of the RBA, Mr O'Rourke said.
"With home loan borrowers carefully looking at rate it is not surprising that the cheapest of the product categories is experiencing growth,'' he said.
Line of credit loans rose slightly in popularity to 12 per cent, thanks to growing popularity in Western Australia and South Australia.
Mortgage Choice approves over 40,000 loans around Australia each year.
