Investor rates on their way down
Interest rates for property investors are beginning to exhibit downward movement, potentially saving investors an average of $22,570 over the life of a 30-year loan.
According to financial comparison site Mozo, average investor P&I rates have dropped 35 basis points (bps) from 4.76% to 4.41% following two recent market occurrences.
“The RBA’s decision to cut 50bps off the official cash rate this year and the removal of the APRA cap on interest only loans has warmed up the paddles of life for property investors,” explained Mozo property expert, Steve Jovcevski.
“This time two years ago, property investors were staring down average interest only rates of 5.12% and lenders were handcuffed around the volume of loans they could issue by the APRA cap.”
“It’s encouraging that as well as rate cuts for investors paying principal and interest, we’re seeing a downward movement on interest only loans,” he added.
Westpac made the most significant cuts of the major banks following the consecutive RBA movements, lowering its investor interest only rate by 35bps in June, and 30bps further in July.
CBA was just behind having implemented two full 25bps cuts of its own.
However, the average investor interest only rate of 4.69% is still 70bps above the owner occupier P&I average of 3.99%.
“While this rate relief is welcome news for investors, compared to owner occupiers, they are still in the hurt locker. At a time when rental returns are under pressure, it’s still difficult to lay a solid foundation for investing in property,” said Jovcevski.
“Considering the current average investor interest only rate is still higher than it was before APRA introduced its cap in 2017, the investor loan market still has a lot of room to move in the coming months,” he added.