Investment loans are getting cheaper(again).
Back in late 2014 APRA issued a warning to banks to curb the rate of growth of their investment lending to 10%. This sparked a wide range of responses from banks and lenders, depending how close they were to the 10% cap.
The almost universal outcome was an increase in interest rates on investment property loans. Not just new loans, but existing loans. Changes to lending policy further restricted investment lending growth.
The balance tipped towards home loans, rather than investment loans, with the former becoming more competitive.
Over time we have seen a gradual thawing of this position by some lenders. Whilst policies haven’t necessarily eased, interest rates are starting to come down bit by bit.
The approach has been patchy as lenders seek ways to remain competitive and gain market share.
We are starting to see investment loans under 4%. A number of variables affect the rate apart from the lender, such as:
- Is the loan interest only or principal and interest
- The percentage of the property value being borrowed
- The property used to secure the loan ie rental property or home( or a combination)
- The total loan amount with the lender
- Fixed or variable
The choice of lender is not all about interest rate. Other factors come into play that are often more important than the interest rate. These should be understood and addressed before considering the rate.
The interest rate is important in determining the cashflow of the property. Current low rates are having a positive effect on rental property cashflow.
The ATO has reported a significant drop in the level of negative gearing being claimed by landlords. A direct result of low interest rates.
Selecting the right investment loan for your circumstances remains a mine field. We can help you get this right.