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Investors keen to refinance, use brokers

More than a third of investors would consider refinancing to a new lender to secure a slightly better rate, while the majority of investors used brokers to secure finance over the past year, according to a survey.

The 2020 Property Investment Professionals of Australia (PIPA) Annual Investor Sentiment Survey revealed that 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.

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

Commenting on the findings, Peter Koulizos, PIPA chairman, observed that the current record-low interest rate environment is encouraging investors to seek better home loan deals.

“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.

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“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.”

Furthermore, lower interest rates could improve investor cash flow considerably, which has been under pressure over the last six months, Mr Koulizos added.

From the tenants’ perspective, the survey revealed that more than 16 per cent of tenants had asked for a rent reduction or holiday during the pandemic.

As a result of reduced or no rent, 13 per cent of investors indicated that they had a cash flow deficit each month, the survey showed.

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Around 8 per cent of investors also applied for a mortgage repayment pause during the lockdown, but 75 per cent did not have to continue the arrangement beyond its original term, the survey found.

Around 8 per cent of investors withdrew from their superannuation during the pandemic, with the reduction in personal or rental income being the main drivers for doing so.

In terms of broker usage by investors, Mr Koulizos said 71 per cent of respondents said they used mortgage brokers to secure finance over the past year.

This figure rose to 80 per cent for investors who indicated that they would use a broker to secure finance for their next property purchase.

“Fewer than 10 per cent of investors indicated they would secure finance directly from a bank for their next investment property loan,” Mr Koulizos said.

A recent report by major brokerage Aussie revealed that 69 per cent of mortgage-holders believe now is a good time to refinance their home loan as the COVID-19 crisis placed pressure on the hip pocket of mortgagors.

However, the report also found that 78 per cent are confused about what refinancing is, while only 22 per cent were able to identify correct examples of refinancing without also choosing wrong examples.

[Related: Aussie refinancers opt for split mortgage]

Investors keen to refinance, use brokers
Investors keen to refinance, use brokers
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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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