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Affordability being chosen over flexibility for loans

By webmaster 05 June 2012 | 1 minute read

Investors have been opting for affordability over flexibility with their loans, according to Mortgage Choice.

In May, with the Reserve Bank cut of 50 basis points, four out of five new borrowers chose variable interest rate home loans.

South Australia saw the biggest increase in demand for this product (up by 12 per cent), followed by New South Wales (4 per cent). Western Australia and Queensland saw 1 per cent increases, while Victoria’s demand for fixed rates dropped by 5 per cent.

Company spokesperson Belinda Williamson said that the interest rate cut may have fuelled this demand, with price-sensitive investors finding comfort in that most majors passed on this cut.

“Out of all the variable rate home loan types, basic variable rates - which tend to be more affordable but less flexible with fewer features at the borrower’s disposal - were the only loan product to gain in popularity over the month, with demand rising to 17 per cent in May from 14 per cent in April,” Ms Williamson said.


This may signal an increase in first time buyers, as these loans are typically popular for those on lower incomes with less experience borrowing, she said.

Victoria’s difference may be the result of the removal of the First Home Owner Bonus and Regional Bonus, causing a lower level of confidence and a desire for a fixed outcome.



Affordability refers to a product or service that is inexpensive and accessible for people with limited means.

Affordability being chosen over flexibility for loans
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