Half a percentage point enough to tempt investors to new lenders

More than a third of investors would consider refinancing to a new lender to secure only marginally better interest rates, according to new research.

The 2020 PIPA Annual Investor Sentiment Survey found about 36 per cent of investors would consider moving their portfolio to take advantage of interest rates just half a percentage point lower than their existing home loans.

PIPA Chairman Peter Koulizos said that the survey result made it clear that investors were on the hunt for better home loan deals, especially in the current historically low interest rate environment.

“Investors have had to pay unfairly high interest rates ever since they were unnecessarily targeted by APRA a number of years ago,” Mr Koulizos said.

“Investor and interest-only interest rates have reduced over recent times but are still significantly higher than owner occupier home loans.

“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.”

The survey also found that 65 per cent of investors would consider refinancing for an interest rate differential of up to one percentage point.

Mr Koulizos said lower interest rates significantly improves investor cash flow, which have been under pressure over the past six months.

The survey found that more than 16 per cent of tenants had asked for a rent reduction or holiday during the pandemic.

“Reduced, or even no, rent coming in meant that more than 13 per cent of investors indicated in the survey that they had a cash flow deficit each month,” Mr Koulizos said.

“About eight per cent of investors also applied for a mortgage repayment pause during the lockdown, but the majority (75 per cent) did not have to continue the arrangement beyond its original term.”

About eight per cent of investors also withdrew funds from their superannuation during the pandemic, according to the survey, with the main reasons for doing so being reductions in personal or rental income.

Mr Koulizos said the vast majority of investors, at 71 per cent, used mortgage brokers to secure finance over the past year.