Real estate investors are taking a stand against rising interest rates

DISGRUNTLED real estate investors are flocking to their keyboards and mortgage specialists after interest rate rises on investment loans have turned them into second-class borrowers.

Research group Canstar has analysed more than 100,000 visitors to its home loan site and found that the proportion of property investors hunting a better deal has jumped more than 20 per cent in six months.

This month’s interest rate rises by the big four banks and several other lenders have widened the gap between owner-occupier and investment loan rates to more than 0.7 per cent in some cases.

Two years ago these rates were identical, before regulators and banks began trying to put the brakes on property investment growth, and today a typical $400,000 loan can cost an investor almost $250 a month more than an owner-occupier.
Canstar’s group manager of research and ratings, Mitch Watson, said investors were charged more than owner occupiers and more still if they had interest-only loans “which are historically where investors have gone”.

Interest-only loans have lower repayments, and it makes financial sense for people to pay off all personal debt before reducing any tax-deductible investment debt.

“Not all lenders have these large margins between owner occupier and investment loans, but it may start to flow throughout the home loan industry,” Mr Watson said.

“Investors tend to be more astute financially, and they’re most likely looking at the market to make sure what they are paying isn’t too high.”

ING Direct joined the rate-hike crowd this week, raising its investment loan interest rate by 0.25 per cent on Wednesday.

Mortgage Choice spokeswoman Jessica Darnbrough said her firm had noticed an increase in investors looking to refinance with another lender or their existing lender.

“But it certainly hasn’t put them off, even though in the last couple of years their rates have increased,” she said.

“Latest Australian Bureau of Statistics data shows investors accounting for 40 per cent of all home loans written and that’s up from about 35-36 per cent 12 months ago.

“It’s not deterring them and they still see property as a sensible investment.”

Canstar’s analysis also found that Australians are looking to borrow big, with only 24 per cent of its site’s visitors seeking loans below $300,000. It found that 57 per cent of people are looking for loans between $301,000 and $650,000 while 19 per cent are searching above $651,000.

“Remember that if you have built up some equity in your home, which many of those searching for a loan of less than $300,000 may have done, then you are in a terrific position to negotiate with your bank or lender for a better deal — whether that is a lower rate or no fees,” Mr Watson said.

Canstar’s analysis was conducted to coincide with the release of its latest Home Loans Star Rating Report today.

Original Source: http://www.news.com.au/finance/money/real-estate-investors-are-taking-a-stand-against-rising-interest-rates/news-story/8f9ffa2720ab52e027754a4d988d2b1b Originally published as Property investors hit back at banks