Borrowers are turning away from fully featured loans in favour of cheaper, basic products according to a recent trend report from mortgage broker Smartline. The report's findings reveal that just a few years ago variable home loans accounted for 75% of loans written. In 2006 they represented less than half the loans written and during the March 2007 quarter that fell to 45%. It also found that of those fully featured variable home loans written in the March 2007 quarter, two-thirds were part of a package offering additional benefits, such as discounted rates and fees, credit cards and transaction accounts. One in five loans written in the March 2007 quarter were basic loans, which offer less features and benefits, but a cheaper rate. Chris Acret, managing director of Smartline, said: "With rising petrol prices and increases in interest rates over the last year, borrowers are more price sensitive than ever before. "Mortgage brokers are helping borrowers to critically review whether they need to pay for all of the bells and whistles of traditional variable loans, with the result that more and more are opting for package-based lending, or basic low-rate loans." He did defend the use of loan features though, saying that many, such as offsetting, can save you money if used correctly. "The most common misconception, which can end up costing borrowers significant money, is that it's all about finding the cheapest rate. There are literally hundreds of products in the market with dozens of features, and often the cheapest rate may not be the best loan for you. Features like redraw, offset accounts and the ability to split the loan are sometimes more important, and can save you more money than a cheaper rate," said Acret. Fixed rate loans represented more than 25% of loans written in the March 2007 quarter, showing that borrowers are still wary of the possibility of rising interest rates over the coming year. Further data from the report shows that BankWest and ING are the two lenders aggressively winning market share in this growing basic loan category. Commonwealth Bank continues to lead the market, with ANZ and NAB holding steady while Westpac declined over the March 2007 quarter.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan