Investors keen to shop around on historically low interest rates

New research shows investors are on the hunt for better deals, with more than a third of investors considering refinancing to a new lender to secure only marginally better interest rates.

According to the 2020 Property Investment Professionals of Australia (PIPA) Annual Investor Sentiment Survey, about 36 per cent of investors would consider moving their portfolio to take advantage of interest rates just half a percentage point lower than their existing home loans, with 65 per cent considering refinancing for an interest rate differential of up to one percentage point.

PIPA Chairman Peter Koulizos said the survey result clearly indicated investors were seeking better home loan deals in the current historically low interest rate environment.

“Investors have had to pay unfairly high interest rates ever since they were unnecessarily targeted by the Australian Prudential Regulation Authority a number of years ago,” he said.

“Investor and interest-only interest rates have reduced over recent times, but are still significantly higher than owner-occupier home loans.

“Many investors are coming off fixed rates and are refinancing to obtain rates that are one or sometimes two percentage points lower than what they had been paying.”

Mr Koulizos said the lower interest rates would significantly improve investor cashflow, which had been under pressure for the past six months due to COVID-19 rent laws, with the survey noting more than 16 per cent of tenants asked for a rent reduction or rent holiday during the pandemic.

“Reduced, or even no rent coming in meant that more than 13 per cent of investors indicated in the survey that they had a cashflow deficit each month,” he said.

“About eight per cent of investors applied for a mortgage repayment pause during the lockdown, but the majority – 75 per cent – did not have to continue the arrangement beyond its original term.”

Around eight per cent of investors also withdrew funds from their superannuation during the pandemic, with the main reasons for doing so being reductions in personal or rent income, according to the survey.

On how investors have been securing finance over the past year, Mr Koulizos said the vast majority – 71 per cent – were using mortgage brokers.

“Even more investors, at 80 per cent, also indicated they would use a broker to obtain finance for their next property purchase,” he said.

“Fewer than 10 per cent of investors indicated they would secure finance directly from a bank for their next investment property loan.”