Westpac IO fixed rates - some good deals

How come investment io rates is going down lately ?

 

Something about they are meeting their APRA quota. So they're firing up the barbie!

 

Pricing increases were a short term measure designed to meet the 30% IO quota on new lending. But lenders will typically overshoot ie go a little further than the quota requires and end up with some capacity from time to time . When that happens you'll see lenders offering deals to get their volumes up again.. and once the volumes reach the quota, they'll turn the taps off for a while.

Typically these campaigns will be fixed rates...not always, but more often than not.

But servicing calcs arent getting any easier, so all the usual warnings about managing cash flow, managing debt reduction and making sure you can afford P&I still apply.

With regards to the barbie being fired up... unfortunately unless servicing calcs become more generous, this is more a case of same barbie, no extra gas, but some steaks are done and now there's a little room on the hotplate for some new steaks.

 

The incentives at play have led to a major shift of IO lending to P&I, so now lenders are well below their new lending criteria @ 30% and hence don't have as much pressure to hike IO rates.

Nonetheless, IO lending is still 'cross subsidising' other more promoted lending types (e.g. Westpac Flexi @ 3.59% vs some IO INV variables near 5%).

 

but the reversion when you go onto variable off of IO is quite high, depending on how much you borrow. 4.89% with 0.9% discount with over 750K borrowings for inv. The other thing is those special rates are only for new loans with the bank. so if you were to refix in 2/3 years time you would be at the higher at 4.19 and 4.24 (in the current market) which isn't bad, but it is for P&I on a inv loan.

I have a CC with westpac and they were ringing me up trying to get me to refinance my loans with them. I very much doubt they will even go close to what i am currently getting on my rates. But goes to show they are trying to entice new customers with their "low" 2/3 year rates in the hopes that people won't switch out of westpac after this period of time or people not clued into what they fall back too after this 'honeymoon' period. The other thing is in 2-3 yrs rules may tighten again and make it even harder to switch away.