Ongoing discount interest rate home loans have become the top choice for 33 per cent of new borrowers, according to May 2011 data from Australia’s largest independently owned mortgage broker, Mortgage Choice.

This is almost double the 17 per cent approved in November 2010 and up 3 percentage points on April 2011. It is the second month this loan type - where the interest rate is discounted over the entire loan term usually in return for an annual fee - has won the ‘most popular’ award.

Every state apart from SA saw a rise in demand last month for these variable rate loans. NSW led the pack with 42 per cent of all approvals.

Variable rate products remain the clear favourite of today’s borrowers, at 89 per cent of approvals. Fixed rate loan demand has moved only slightly between 10 per cent and 12 per cent for four months now. Appetite dropped one percentage point from April to May, to 11 per cent of approvals.

Mortgae Choice spokesperson Kristy Sheppard said t here are some highly competitive deals on the table for new borrowers just as there are for those looking to refinance.

Accordinng to Ms Sheppard, “Many lenders, large and small, are enhancing their product offerings in an attempt to pull more business into their books. This increases the negotiating power you have as a borrower, especially if you work with an experienced mortgage broker that has a large lender panel.

“Anyone who hasn’t at least explored their options could easily be giving themselves a raw deal by simply going with their everyday lender or ignoring the possibility of switching to a better suited or more affordable home loan.”

The second most popular loan type for May was standard variable rate, at 24 per cent, closely followed by basic variable rate, at 23 per cent.
The popularity of line of credit home loans, often more popular with investors, rose 1 percentage point to 5 per cent of approvals as did introductory rate loans.