On the up: What will higher interest rates mean for real estate investors in New Zealand and further afield?
The Land of the Long White Cloud is shaping up to raise rates and the country may well be a bellwether for the Australia...
New research has shown that more than a third of investors would consider refinancing to a new lender to secure interest rates even just half a percentage point lower than their existing home loans.
The 2020 PIPA Annual Investor Sentiment Survey found that approximately 36 per cent of respondents would consider an offer from a new lender if they were to secure a lower rate, even if this rate was only marginally lower.
“Investors have had to pay unfairly high interest rates ever since they were unnecessarily targeted by APRA a number of years ago,” PIPA chairman Peter Koulizos said, commenting off the back of the findings.
“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 1 or, sometimes, 2 percentage points lower than what they had been paying.”
The PIPA survey also found that 65 per cent of investors would consider refinancing for an interest rate differential of up to 1 percentage point.
A further 16 per cent of tenants had asked for a rent reduction or holiday during the pandemic, the survey found.
“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 8 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.”
Elsewhere, the survey pinpointed trends on super and how investors go about securing finance.
The survey found that around 8 per cent of investors withdrew funds from their superannuation during the pandemic, with the main reasons for doing so being reductions in personal or rental income.
“Even more investors, at 80 per cent, also indicated they would use a broker to obtain finance for their next property purchase,” Mr Koulizos said.
“Fewer than 10 per cent of investors indicated they would secure finance directly from a bank for their next investment property loan.”
Interest is the amount of money charged by a lender or financial institution for a loan, which is calculated as the percentage of the principal amount paid over the loan term.