Mortgage lenders are slashing interest rates for investor borrowers – many below the 3 per cent mark – providing much-needed discounts for property investors amid a dwindling rental market.
Forty-seven mortgage lenders have reduced interest rates for investors in the past two months despite no cut to the official cash rate, new RateCity data shows.
Among the lenders which did trim their investor interest rates, the average reduction was about 0.27 per cent between mid-June and mid-August.
However, borrowers living in their own homes received attention from more lenders, with 61 shaving owner-occupier rates in the same period. The average discount, at 0.26 per cent, was slightly smaller than what investors have received.
Investor interest rate cuts came from major lenders like NAB and Macquarie Bank, as well as smaller players such as Homestar Finance.
Average investor interest rates plunge
Both owner-occupier and investor interest rates have been on the decline since March, when the Reserve Bank of Australia (RBA) cut the cash rate to a record low of 0.25 per cent.
The average investor interest rate fell from 3.92 per cent in March to 3.48 per cent in August, while the average owner-occupier rate was down from 3.69 per cent to 3.26 per cent.
Investors saw a bigger drop on their average fixed rates (0.54 per cent since March) than owner-occupiers (0.48 per cent). It’s worth nothing this may have been due to investor fixed rates coming off a higher base.
However, owner-occupiers received a slightly bigger discount on variable interest rates on average at 0.35 per cent since March, compared with investors at 0.31 per cent.
While the average investor rates are still in the 3 per cent range, it’s possible to nab a lower rate. According to RateCity analysis, 27 lenders are offering investor rates below 2.5 per cent, while 92 lenders have investor rates below 3 per cent.
The lowest variable investor rate on the RateCity database is 2.49 per cent (2.52 per cent comparison rate), which comes from Homestar Finance. Meanwhile, UBank has the lowest fixed rate at 2.29 per cent (2.74 per cent comparison rate).
Average variable rates (P&I and IO) | ||
Owner-occupiers (%) | Investors (%) | |
March 2020 | 3.90 | 4.21 |
August 2020 | 3.55 | 3.90 |
% change Mar-Aug 2020 | -0.35 | -0.31 |
Average fixed rates (P&I and IO) | ||
March 2020 | 3.52 | 3.74 |
August 2020 | 3.04 | 3.20 |
% change | -0.48 | -0.54 |
Average rates (fixed and variable, P&I and IO) | ||
March 2020 | 3.69 | 3.92 |
August 2020 | 3.26 | 3.48 |
% change | -0.43 | -0.44 |
Source: RateCity.
Extra scrutiny for new investor borrowers
Sally Tindall, research director at RateCity, said COVID-19 is expected to bring on more scrutiny from lenders to investor borrowers. And with falling rents and rising vacancies in the housing market, investors may need to do more homework before diving into the property market.
“If you are thinking about buying a new investment property or refinancing your investment loan, be prepared for extra scrutiny and potentially extra paperwork,” she said.
“At the end of the day, the bank just wants to make sure the numbers stack up, even if you hit tough financial times and that’s important.”
For mortgage holders who already have an investment property, it could be a good time to consider tapping into the low interest rate environment by looking for a better deal, Ms Tindall said.
“For most refinancers, the new rate you get, and the savings from it, will far outweigh the effort it takes to get your paperwork in order,” she said.
Lowest investor variable rates
Lender | Advertised rate (%) | Comparison rate (%) |
Homestar Finance |
2.49 |
2.52 |
Easy Street Financial Services |
2.59 |
2.63 |
Police Credit Union |
2.69 |
2.74 |
Pacific Mortgage Group |
2.69 |
2.69 |
State Custodians |
2.74 |
2.76 |
Lowest investor fixed rates
Lender | Advertised rate (%) | Comparison rate (%) |
Hume Bank* |
1.99 |
3.71 |
UBank |
2.29 |
2.74 |
MOVE Bank |
2.39 |
3.52 |
Well Home Loans |
2.39 |
2.82 |
HSBC |
2.39 |
3.39 |
*Hume Bank rate is only available to new loans for the purpose of renovation or construction of new properties located within a 150 kilometre radius from the Albury Post Office, 570 Dean Street, Albury NSW 2640.
Source: RateCity. As of August 18, 2020.