Home loan borrowers are betting that the monetary policy tightening cycle has ended, opting for variable rate loans in record numbers. Mortgage aggregator and lender AFG reported in its latest AFG Mortgage Index that 81.2 per cent of home loans written by its brokers during the September quarter were variable rate loans – the highest level it has ever recorded. AFG said the cumulative effect of the Reserve Bank’s rapid rate increases, the withdrawal of cashback offers, supply constraints and cost of living pressure slowed home loan activity during the quarter. AFG brokers lodged A$20.9 billion of loans – 6.9 per cent down on the June quarter. The biggest fall was in Western Australia, where volume fell 12.2 per cent over the three months. AFG chief executive David Bailey said conditions were tough for non-bank lenders during the quarter, with the cost of funds relative to current market rates presenting a challenge. Bailey said the removal and reduction of cashback offers has resulted in flows away from the big banks and their subsidiaries. Their share of AFG business fell 2.9 per cent to 57.5 per cent.