The most recent round of bank rate hikes has pushed would-be investors over the edge, resulting in a sharp drop in investor housing commitments.
Today’s ABS Housing Finance data shows the value of investment housing commitments in July fell by $460 million or 3.9 per cent from the previous month, according to the seasonally adjusted figures.
The last out-of-cycle rate hikes for investors and customers paying interest-only were announced and enacted in June.
“The timing of this drop says it all,” said RateCity money editor Sally Tindall.
“In June we saw the big banks lift rates for investors. The very next month, almost half a billion dollars of investors’ dollars fell away.
“Today’s ABS figures confirm that investors are finally getting APRA’s message,” she said.
Shop around or pay the penalty
RateCity data shows the difference between owner-occupiers paying principal and interest and investors paying interest-only is on average 0.65 percentage points, but can climb as high as 1.94 percentage points.
“It’s no surprise some investors are getting cold feet. If they don’t shop around, they can get stung by almost 2 percentage points. That translates to $173,271 on a $350K 30-year loan,” Ms Tindall said.
Note: Calculations assume five-year interest-only period.