Demand for fixed interest rate home loans hit its highest level in five months in June 2011, reaching 12.3 per cent of all approvals for Australia’s independently-owned mortgage broker, Mortgage Choice.

Every state apart from SA saw a rise in appetite for fixed rate loans. The largest increase in interest came from WA, where demand rose from 9.4 per cent in May to 14.2 per cent in June.

However, ongoing discount home loans - where the interest rate is discounted over the entire loan term usually in return for an annual fee - remains the clear favourite at 32.2 per cent of approvals, dropping less than half a percentage point over the month.

Company spokesperson Kristy Sheppard said, “Perhaps the constant speculation about interest rate rises in the latter half of 2011 and beyond convinced a higher number of borrowers to simply lock in their rate rather than feel their stomach churn with each piece of speculation.”

“July’s figures will be interesting because over the past month we’ve seen several lenders reduce their fixed rates on home loans. Now, there’s one tenth of a percentage point between the average three-year fixed rate, traditionally the most popular with borrowers, and the average basic variable rate. We haven’t seen that close a comparison in some time.

“Of course, there’s still a range of good ongoing discount rate home loan deals on the table at present, hence the overriding popularity of that more flexible product type.”

The second most popular loan type for June was standard variable rate, at 24.6 per cent, closely followed by basic variable rate, at 20.8 per cent. Demand for line of credit home loans, often more popular with investors, rose slightly to 5.1 per cent of approvals as did introductory rate loans to 4.9 per cent.