What are people's rates for IO investment lending?

Discussion in 'Loans & Mortgage Brokers' started by jyeung80, 19th Jun, 2017.

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  1. jyeung80

    jyeung80 Well-Known Member

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    Just wondering what people out there are getting for their interest rates? Key criteria are:
    1. Investment lending
    2. Interest only
    3. 100% offset account available
    4. residential property
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Variable rates for these types of loans vary between about 4.3% - 5.2% depending on LVR and lender. For an 80% loan right now with one of the larger banks, you'll probably pay about 4.7%.

    Smaller lenders haven't been as affected by the interest only restrictions, some aren't differentiating between I/O and P&I at all (for the moment).

    Overall however, I expect the gap between the two repayment types will only increase. In the UK, the difference is as much as 2%.
     
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  3. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    What Pete said.

    The spread for investment loan repayments (P&I and IO) to be on par is about 1.65% pa as per below. I can't see it getting that high as the cynic in me thinks the banks would lose too much easy margin if everyone switched back to P&I plus their books would start running off. I think we are about 0.5% away from the spread top and it will end up about 1.00% different or just enough to be below the 30% APRA cap all the while collecting some nice fat extra margin.

    Current
    $1,000,000 @ 4.25% P&I over 30 years = $4919 / month
    $1,000,000 @ 4.80% IO = $4000 / month
    Spread = 0.55%
    Cash flow benefit for IO= $919

    Expected?
    $1,000,000 @ 4.25% P&I over 30 years = $4919 / month
    $1,000,000 @ 5.25% IO = $4375/ month
    Spread =1.00%
    Cash flow benefit for IO = $544

    Break even
    $1,000,000 @ 4.25% P&I over 30 years = $4919 / month
    $1,000,000 @ 5.90% IO = $4919 / month
    Spread = 1.65%
    Cash flow benefit for IO = $0
     
  4. Big Will

    Big Will Well-Known Member

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    4.54% IO IP
    4.06% IO PPOR

    Not the greatest but typically I found to get the greatest interest rate you need to have a bigger total loan amounts with them.
     
  5. MTR

    MTR Well-Known Member

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    Ticking above lowest bank rate interest only, 3.92% AMP. - 1.2M

    Unfortunately they now will only go 50% lvr for new clients
     
    Last edited: 21st Jun, 2017
  6. Pawer

    Pawer Member

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    IO $925k. Wbc. 4.39% fulloffset

    Going up 0.34 end of this month
     
  7. Dean Collins

    Dean Collins Well-Known Member

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    ....unless you are talking 3 or 5 year fixed.....whats the point.

    Banks are getting too greedy and lack of competition means whoever is cheapest this month could have changed by the end of the year.....eg well before you've paid your mortgage off.
     
  8. Tattler

    Tattler Well-Known Member

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    3.99% 5 year IO Investment (Westpac)
    3.99% 3 year IO Investment (CBA)
    4.26% 3 year IO Investment (Westpac)
     
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  9. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    I think you have to xcoll with a PPOR as well and PPOR must be of greater value to get that. Is that what you are on?

    They hiked IO investor rates lately as well.
     
  10. MTR

    MTR Well-Known Member

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    no cross, let me check if there have been any recent increases. back soon
     
  11. euro73

    euro73 Well-Known Member Business Member

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    There's no point comparing rates- they're changing too frequently. Unless you are fixed, your rate wont stay as it is for more than 3 months ;)
     
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  12. C-mac

    C-mac Well-Known Member

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    @kamchatsky how big is your loan book with CBA if you dont mind me asking?

    How the devil are you able to source those kind of rates for IO, INV mortgages?? (Be it fixed, or variable?).

    Is your loan book value with them greater than 5 mill?
     
  13. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    possibly referring to fixed rates? Or miss classified as an owner occ loan? That could well be it.
     
  14. jins13

    jins13 Well-Known Member

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    Are those variable rates? If so, it's really awesome and thinking you have a low LVR.
     
  15. sash

    sash Well-Known Member

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    It is about to get interesting...people...the banks are raising IO variables constantly...we should see rates with a 5 in front by Xmas....IO fixed rates have also move up but still below 4.7% for 2-3 years

    With the need to get IO loans below 30% could this cause the correction in the higher priced Sydney and Melbourne market...PI on 640k at 4.3% vs 4.7% I/O is still about $500 more per month!

    This is the cliff people are not seeing.........
     
  16. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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    yeah... I estimated that the demand will decrease by 10% at least, as money will be vanished from the market by:
    - higher IO loan repayments who decides to stay with IO
    - higher repayments due to conversion to P&I

    Other negative factors for demand & supply:
    - some people would be forced to sell
    - harder to buy with >80% LVR
    - harder to buy with low income - new serviceability assessment (ability to survive with 7% interest rate)
    - more pressure on foreign investors (stamp duty + land tax)
     
  17. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    They appear to be fixed rates, but were likely fixed more than a month ago.

    I've got 5 year fixed, interest only investment loan with CBA at 90% LVR for 4.07% - but I fixed it in November 2016. No chance you can get that deal today.

    Comparing what rates you've got is irrelevant unless you disclose all the details of the loan, including when it was negotiated.
     
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  18. Corey Batt

    Corey Batt Well-Known Member

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    They look like some fixed rates which were on offering a few months back. We were pushing these sorts of products hard as rates were edging up in one direction only. Those who didn't take it up are kicking themselves now.

    I think what we're looking at with these turbulent rates/pricing environment is the end of the price war in home lending which has been the case for circa 3 years. As others have mentioned in this thread - there is no point in comparing as the time you applied for your finance, the exact parameters of the loan etc are all different so there is no comparative value.
     
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  19. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Are lenders still offering fixed IO loans?
    I thought they want to get close to 30% limit asap and fixed rate IO loans doesn't help them get there.
     
  20. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Lenders are still offering IO across all their products. They're discouraging people from choosing IO repayments through higher rates. There's plenty of evidence that it's working.
     

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