In the latest economic environment, variable loans have dramatically gained popularity, with a remarkable 98.60% of new borrowers opting for this type of loan, as per recent data from the Australian Bureau of Statistics. This marks a significant shift from the early days of the pandemic in March 2020, when 86.62% of borrowers chose variable loans, and 13.38% went for fixed-rate loans.
The main driver behind this trend is the belief that interest rates have reached their peak, making variable loans more attractive. Borrowers anticipate benefiting from potential rate cuts in the future. This scenario is quite different from July 2021, when interest rates were at record lows, and nearly half (46.02%) of the loans were fixed.
Fixed vs. Variable Loans: Pros and Cons
Deciding between fixed and variable loans can be tricky. Here are some key points to consider:
Fixed Loans:
- Advantages: Predictable repayments, protection from interest rate increases.
- Disadvantages: Less flexibility, possible higher costs if rates drop.
Variable Loans:
- Advantages: Potential savings from rate cuts, generally lower initial rates.
- Disadvantages: Unpredictable payments, risk of rate hikes.
For personalised advice on choosing between fixed and variable loans, contact our expert team today.