Investment Interest only rates

Hi all

Has anyone seen any change in investment interest only variable or fixed rates?

OO rates have changed but Investment Interest only don't seem to have changed, especially fixed

Thanks

 

Nuthin yet!

 

I am also waiting

 

What’s the best discount below the SVR that anyone has negotiated with major banks recently for the OO and IV loans both P&I and IO?? Thanks

 

2.00%

 

Wow! With who?

 

2.25% Discount - Westpac investment interest only

Though keep in mind that this was for 3.3 mil lend at a sub 60% LVR

I suspect the bigger loan amount and the lower the LVR - the better the chance to negotiate a better discount

a small portion of that loan amount is owner occupied debt which was at 1.99% off there SVR P and I

This loan was obtained through a broker - actually one that posts here - confidence finance - I highly recommend them

ANZ were willing to offer the same rates as well

 

Thanks @Arcticfire

A lot of the discounting comes down to timing (and some level of pushing/negotiating with banks). Asking at the right time in market will usually yield larger discounts than other times (varies on market).

I suspect discounting may increase soon given the rate cuts that have fed through to lower funding costs overall —> but largely not passed onto existing back books. Ie it’s a good time.

 

I think putting emphasis on the size of the discount is the wrong way to look at it as some lenders have higher base rate than others. So a higher discount doesn't necessarily mean a lower rate when compared to other lenders.
The end rate is what you should compare

 

What are people's thoughts on a fixed IO rate for 5 years of 2.49% for Investment?

It seems like a decent interest rate but I don't know if I want to fix for that long

 

2.23% discount on Bank of Melbourne Investment P/I here. 2.5M total borrowing, although this discount was only on the Investment half. Considering fixing the Owner Occupier half.

Discounts are definitely getting larger over time

 

From my past experience, fixing rates always favour the banks. No wonder why major banks have reduced their fixed rates and not changed their SVR inspite of a historic reserve cut and rate.

Therefore I’d recommend keeping loans variable with max negotiated discount specifically in this current environment.

 

I think 2.48%

 

Banks hedge all fixed rate loans using the swap market (a subset of the bank bill market). They do this to lock in their margin to avoid being exposed to market risks. Its why a break fee is associated with fixed loans. If market rates change the banks rate changes - up or down. Banks dont punt on margins as the multiplier effect could kill teir balance sheet and APRA would have major issues.

Most people have no recollection of the 1990s when rate differentials were huge. But what few dont realise is Banks now make much much higher profits now than when rates were 15%. Why do I say that ?

If a bank wants a 0.5% margin for its profit then at 2.2% this reflects a far higher proportion of the loan than at 15%.

example Margin on 15% - 14.5% for a $1m loan. Bank margin is $5,000. Margin at 2.2% is $5,000... But they are the same ? No they are not.
$5K as a margin on a 15% loan is $150,000 - Bank makes 5/150 = 3.33%
$5k as a margin on a 2.2% loan is $22,000. Bank makes 5/22 = 22.7%
So 0.5% isnt 0.5% as one is almost 7 times larger than the other. So banks can now make far thinner margins and make huge profits.
What I fear is when rates turn banks MUST multiply their margins to remain profitable. This is a way off but may catch many borrowers quickly. eg rates go up 0.25% the banks may increase rates by .35% or more.

So at low rates the inverse occurs for variable rates. The bank wants to protect its thin margin and it makes it hard to offer a rate cut.

When you see a fixed rate you can "infer" the expected future rate. eg what rate does it need to get to to make it look good or bad ?

eg Variable rate is 2.25%. 1 year fixed is 1.89%. This suggests through some basic maths that in six months the variable could be 1.305%.to average 1.89% over 12 months...This seems low. Too low ? The 1 year rate may actually be a terrific deal. BUT if you also want to pay more off the loan its terrible as fixed loans dont allow that. Or if you plan to sell in three months its a poor choice. And you cant have a offset.

I used to be a senior treasury dealer in a major bank

 

CBA has offered me 2.79% IO on inv for 1 year. Small existing loan of $330k, so I couldn’t negotiate any further. I’m thinking of locking it for one year as my gut is telling me that the fixed rates will lower. And I can’t refinance to another bank at the moment so I am stuck. My variable on this loan is 3.69% so it seems like a no brainer.

 

Do it. That's a 32% saving each month for that year on the variable rate. Every month you delay you're 'losing' nearly $250 on this differential.

 

Was offered 2.49 fixed for 1 year IO on investment today. I think that’s good? Good-ish? Better than what I was on.

 

that’s a good rate - which bank offered you that ?

 

Loans.com.au

I turned it down as was annoyed they wouldn’t offer me the rate for new customers (1.99%) but might swallow my pride on Monday and accept.