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What does it take to make investors switch loans?

  • October 20 2020
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Borrow

What does it take to make investors switch loans?

By Cameron Micallef
October 20 2020

Savvy investors are looking to take advantage of record-low interest rates and are willing to switch loans even for minor reductions in rates, research has revealed.

switch loans

What does it take to make investors switch loans?

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  • October 20 2020
  • Share

Savvy investors are looking to take advantage of record-low interest rates and are willing to switch loans even for minor reductions in rates, research has revealed.

switch loans

According to the Property Investment Professionals of Australia (PIPA), 36 per cent of investors would switch rates to save half a percentage point on their mortgage.

PIPA chairman Peter Koulizos said the survey result made it clear that investors  were on the hunt for better home loan deals, especially in the current record-low interest rate environment.  

“Investors have had to pay unfairly high interest rates ever since they were unnecessarily targeted by APRA a number of years ago,” Mr Koulizos said.  

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

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“Many investors are also 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.”  

As the rate of savings increases, so does the likelihood of investors switching, with the research showing two in three investors would change to save 1 per cent on their mortgage repayments.

Mr Koulizos said lower interest rates significantly improve investor cash flow, which has been under pressure over the past six months.  

Further, the survey found that more than 16 per cent of tenants had asked for a rent reduction or 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 cash flow deficit each month,” Mr Koulizos said.  

“About 8 per cent of investors also 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.” 

About 8 per cent of investors also withdrew funds from their superannuation during the pandemic, according to the survey, with the main reasons for doing so being reductions in personal or rental income.

What does it take to make investors switch loans?
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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