Property investors have faced pressure on their cashflow and strain on their resources during COVID-19, as tenants are forced to ask for paused or reduced rent.

A recent survey shows that more than a third of investors would consider refinancing their portfolio to a new lender if offered interest rates just .5% lower than their current loan.

According to the 2020 PIPA Annual Investor Sentiment Survey around 36% of investors would consider moving home loans for a reduction of even half a percent in interest rates and 65% would do the same for a 1%.

“Investor and interest-only interest rates have reduced over recent times but are still significantly higher than owner occupier home loans,” said PIPA chairman Peter Koulizos.

“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,” he added.

With 16% of tenants asking for a pause or reduction of rent during the pandemic, the survey suggests that lower interest rates would significantly reduce the strain that cashflow has been put under over the last six months.

More than 13% of investors claimed that they had a deficit in cashflow and around 8% of investors applied for a mortgage repayment pause. Around 8% also had to withdraw funds from their superannuation, with the survey putting the onus on reduction in personal or rental income.

The survey also suggests investors have a shaky faith in banks as less than 10% would secure finance directly a bank for their next investment property loan. Instead 80% stated that they would use a broker when financing their next purchase, with 71% answering that they had used a mortgage broker to do so over the past year.

Koulizos claims that investors have had to pay “unfairly high” interest rates and that the results from this survey show that in this time of historically low interest rates investors are keenly searching for better home loan deals.

 

Hannah Page, Australian Property Journal, 19 October 2020
https://www.australianpropertyjournal.com.au/2020/10/19/property-investors-looking-to-switch-lenders-as-costs-bite/