An online lender has become the first in the industry to offer investors a mortgage rate below the coveted 2 per cent mark -- but there are a couple of conditions that need to be met.
Loans.com.au has taken the wrapping off its latest financial product: an investor home loan with an interest rate of 1.99 per cent for the first year of both principal plus interest and interest-only home loans. (The product has a comparison rate of 2.71 per cent.)
“This is the lowest investment loan rate offer in Australia right now,” Marie Mortimer said, managing director of Loans.com.au.
“Investors who are considering switching to a lower rate … should take the opportunity to reassess their loan provider and potentially refinance.”
The rate is the lowest in RateCity’s comprehensive database of investor mortgage products, while the 2.74 per cent rate it reverts to from its second year is the seventh lowest.
Part of a bundle
Investors interested in refinancing with Loans.com.au need to bring their owner-occupier mortgage along too as a refinancing bundle onto its Smart Booster loan.
A RateCity analysis found if someone with an owner-occupier loan and an investor loan of $400,000 each switched from the RBA’s existing customer rates to the 1-year introductory rate from Loans.com.au, they could potentially save $9,725 in the first year, including refinancing costs. Over the first five years, they could save more than $34,935.
Loans.com.au was the first lender to offer owner-occupier mortgages below two per cent, Ms Mortimer said. The nine year old company is a subsidiary of Firstmac, a 40 year old non-bank lender with a $12 billion mortgage portfolio.
Interest rates at low levels
The 1.99 per cent introductory interest rate is 0.50 per cent lower than the next investor variable rate of 2.49 per cent on principal plus interest loans, and 0.70 per cent lower than the next 2.69 per cent interest only investor loan, Sally Tindall said, research director at RateCity.
“While many customers are unlikely to meet the terms and conditions on this package, people with both an owner-occupier and investment loan could stand to make significant savings in the first year if they move both of their mortgages across to a 1.99 per cent rate.”
“Both these rates will jump up after the first year but the revert rates are still competitive, falling in the top 3 per cent of comparable loans.”
Banks are having to be more competitive to secure a shrinking pool of new home loans, Ms Tindall said, adding it is leading to a tumble in interest rates on mortgages.
“This kind of competition is great for investors, particularly if they’re willing to refinance,” she said.
“Refinancing requires a bit of paperwork, especially for investors, but the savings are likely to far outweigh the effort you’ll need to invest to make it happen.”