According to a new study by the Property Investment Professionals of Australia (PIPA), a small difference in interest rates is enough for real estate investors to consider switching or refinancing with another lender.
One in three investors said they would consider moving their portfolio to take advantage of even a half a percentage point difference in mortgage rates. For 65% of investors, a difference of up to a percentage point can force them to change lenders.
Peter Koulizos, President of PIPA, said the survey results indicate that investors are actively seeking better deals to take advantage of the low rate environment.
"Investors have had to pay unfairly high interest rates since they were needlessly targeted by the Australian Prudential Regulation Authority a few years ago," he said .
In 2014, APRA set a limit on the growth of residential investment loans. Over the next four years, banks had to limit the growth of investment loans to 10 percent.
APRA also introduced a measure limiting interest-only lending for more than one year from 2017. Interest-only loans are typically used by real estate investors who take advantage of tax deductions.
Koulizos said cash flow is a critical consideration for many investors who are currently under financial pressure due to the COVID-19 pandemic. He said lower rates help alleviate those financial setbacks and improve cash flow.
"A reduced or no annuity meant that more than 13% of investors reported in the survey that they had a cash flow shortfall every month," he said.
In addition, around 8% of investors had to request a deferral of repayment during the foreclosure phase. Pretty much the same accessed their super fund due to reduced personal and rental income.
Despite expectations that the cash rate will be further reduced this month, the RBA has decided to keep it at its current historic low of 0.25%.
Although the central bank believes that a global economic recovery is underway, it remains to be seen whether its goals are achievable in the short to medium term. This could indicate a possible rate cut next month, said Shane Oliver, chief economist at AMP Capital.
"Our baseline scenario remains that the RBA will lower the cash rate, the term facility rate, and the three-year bond yield target to 0.1% and will now do so at its November meeting after updating its forecast, which will likely show that its employment and inflation targets will still not be met for at least the next two years, "he said. he declared.
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