Investor loans: the latest cuts and why now may be the best time to secure one
Commonwealth Bank has slashed rates on some of its investor home loans for the third time in just over a month, a move that's reigniting competition in the investor mortgage space.
Following two cuts in May, CBA's latest round of rate cuts has trimmed its Digi Home Loan rates for new investor customers by between 0.07 and 0.12 percentage points.
The principal and interest (P&I) rate is now down to 5.69 per cent and the interest-only option to 5.95 per cent.
Cantsar believes CBA is sending a message to investors.
"CBA has trimmed its investment loan rate three times in the space of five weeks, while leaving its owner-occupier rate untouched," Canstar's data insights director Sally Tindall said.
"The bank is deliberately targeting property investors, particularly refinancers...it sends a clear message to investors that the door is wide open for their business."
CBA leads the pack in investor rate cuts
According to Canstar, CBA's investor rates were already the most competitive of the big four banks, with the current drop, more than the RBA's prescribed cuts, consolidating their position.
Their rates undercut Westpac (5.84 per cent P&I), ANZ (5.89 per cent P&I), and NAB (6.46 per cent P&I) on comparable digital or basic investor products.
This signals a deliberate shift from CBA, which holds the largest share of the home loan market at around 27 per cent, compared to Westpac's 22 per cent.
"It will be interesting to see if any of CBA's key competitors chase after it with investor rate cuts of their own," said Ms Tindall.
"Westpac is best placed to do this with a gap of just 15 basis points between the lowest investor rates from each bank.
"With variable rates likely to come down further, easing the pressure on borrowers across the country, we could see banks' appetite for investor loans increase."
Investor vs owner-occupier - the gap is closing
Since 2015, investor loans have carried higher interest rates than owner-occupier loans. But the latest CBA moves signals a market shift that is narrowing the gap.
"Right now, the gap between the average owner-occupier rate and the average investor rate is just 0.22 percentage points, however, this could get even narrower if competition continues to heat up," said Ms Tindall.
"However, banks aren't likely to be rolling out the red carpet to every borrower.
"They're going to want quality investments, ideally where the rental return is still strong and the owner has a good track record of paying their loan on time."
Previously, CBA's owner-occupier P&I Digi rate was 5.84 per cent, while the investor P&I rate was 6.03 per cent (as of early May).
After cuts, its investor loan is now 5.69 per cent, while the owner-occupier option remains around 5.84 per cent - meaning the gap has compressed to about 0.15 points.
According to RBA data, the average new investor is paying 0.22 percentage points more than the average owner-occupier, showing CBA's clear strategy to remain market leader in this space.
Why have investor loans historically been more expensive?
Mortgage broker Sheng Ye of Home Loan Experts said the roots of this pricing gap go back to regulatory changes a decade ago.
"Historically, banks offered similar rates for investment and owner-occupier home loans. However, in 2015, the Australian Prudential Regulation Authority (APRA) became concerned about the rapid growth of investment lending, particularly interest-only loans, fearing it could lead to instability in the housing market," he said.
"To mitigate this risk and rebalance their loan portfolios, banks were prompted to slow down investment lending, which led to an increase in interest rates for investment home loans."
Those restrictions have since eased, but the higher-risk perception of investment loans remains - especially among lenders concerned with repayment reliability.
Senior mortgage broker Jonathan Preston from Home Loan Experts agreed.
"I think the arrears rate is higher on investment loans, so banks charge more on a rate-for-risk basis," he said.
Is now a good time to lock in?
With the Reserve Bank still holding the cash rate steady, and signs of inflation are easing, some investors may be tempted to fix part or all of their mortgage.
But Mr Preston cautioned borrowers who might be planning to refinance in the near future to tread carefully.
"If someone has plans to regularly refinance, fixing might be risky, as you might get caught up with break costs," he said.
He also reminds property investors to stress-test their budget before diving in.
"Can you afford the mortgage for six months if the tenant doesn't pay and if the property needs major repairs?"
Once you've dotted your I's and crossed your T's, Ms Tindall sees now as a good opportunity, especially if you're happy to put in some work to find the best deal.
"If you've built up a decent deposit and have a solid rental return, now's a great time to shop around. There are competitive deals out there, but you've got to hunt them down to get them."
With interest rates appearing to stabilise and rental yields strong in many parts of Australia, now may be a rare window where investor loans offer real value.
CBA's latest cuts show the majors are starting to compete harder for investor borrowers - a group that has historically been sidelined by tighter regulations and higher costs.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Advertiser
3 hours ago
- The Advertiser
Long way to go to stop lending for deforestation
Australian banks have been slow to trim exposure to deforestation, with big agribusiness players still found to be lending to bush-bulldozing businesses. Two years on from the Australian Conservation Foundation's first foray into the financing of destructive land clearing, a follow-up report points to sluggish progress. Destruction of bushland for grazing, real estate and other development contributes to climate change and threatens species, such as the endangered pink cockatoo, as well as undermining Australia's international commitments to halt and reverse biodiversity loss. Deforestation also poses material risks to banks, ACF corporate responsibility policy analyst Audrey van Herwaarden told AAP. Mature trees are important for soil integrity, she said, as well as protection from extreme weather. Landowners with poorer soil and less productive land are more likely to miss repayments, manifesting as a credit risk to the bank. Reputational risk are also at play, with landowners caught land clearing illegally forced to pay steep remediation costs. The five big agribusiness players, ANZ, Westpac, Commonwealth Bank, National Australia Bank and Rabobank, were linked to cases of deforestation via mortgages over land titles in the 12 months from July 2023. Bank loans through securities on title are a common method for financing deforestation but the environmental group stressed it could not be certain the loans were used for bulldozing. Several mortgages were issued or reissued during or after the destructive landclearing had taken place, raising "serious questions about due diligence or, worse, wilful ignorance". Nearly half the cases might have been in breach of federal nature laws and the environment group had reported them to the relevant department. "Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," Ms van Herwaarden said. NAB, a major agribusiness lender, was twice as exposed as its peers across the 100 cases of deforestation from around the country. A spokesperson said the bank was addressing many of the report's recommendations, including doing more to engage stakeholders and investing in geospatial tools. "NAB is Australia's largest lender to agriculture and we understand deforestation is a complex issue that requires collaboration across government, industry and landholders," the spokesperson said. As well as calling on banks to commit to eliminating deforestation from their lending portfolios - a move already taken by Westpac - the environmental group also wants government to step up. A national strategy to end deforestation by 2030 is a key request, as well as executing on long-delayed reforms to broken nature laws. Both Commonwealth Bank and ANZ pointed to their social and environmental policies that dictate how they support their customers to manage deforestation risks. Australian banks have been slow to trim exposure to deforestation, with big agribusiness players still found to be lending to bush-bulldozing businesses. Two years on from the Australian Conservation Foundation's first foray into the financing of destructive land clearing, a follow-up report points to sluggish progress. Destruction of bushland for grazing, real estate and other development contributes to climate change and threatens species, such as the endangered pink cockatoo, as well as undermining Australia's international commitments to halt and reverse biodiversity loss. Deforestation also poses material risks to banks, ACF corporate responsibility policy analyst Audrey van Herwaarden told AAP. Mature trees are important for soil integrity, she said, as well as protection from extreme weather. Landowners with poorer soil and less productive land are more likely to miss repayments, manifesting as a credit risk to the bank. Reputational risk are also at play, with landowners caught land clearing illegally forced to pay steep remediation costs. The five big agribusiness players, ANZ, Westpac, Commonwealth Bank, National Australia Bank and Rabobank, were linked to cases of deforestation via mortgages over land titles in the 12 months from July 2023. Bank loans through securities on title are a common method for financing deforestation but the environmental group stressed it could not be certain the loans were used for bulldozing. Several mortgages were issued or reissued during or after the destructive landclearing had taken place, raising "serious questions about due diligence or, worse, wilful ignorance". Nearly half the cases might have been in breach of federal nature laws and the environment group had reported them to the relevant department. "Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," Ms van Herwaarden said. NAB, a major agribusiness lender, was twice as exposed as its peers across the 100 cases of deforestation from around the country. A spokesperson said the bank was addressing many of the report's recommendations, including doing more to engage stakeholders and investing in geospatial tools. "NAB is Australia's largest lender to agriculture and we understand deforestation is a complex issue that requires collaboration across government, industry and landholders," the spokesperson said. As well as calling on banks to commit to eliminating deforestation from their lending portfolios - a move already taken by Westpac - the environmental group also wants government to step up. A national strategy to end deforestation by 2030 is a key request, as well as executing on long-delayed reforms to broken nature laws. Both Commonwealth Bank and ANZ pointed to their social and environmental policies that dictate how they support their customers to manage deforestation risks. Australian banks have been slow to trim exposure to deforestation, with big agribusiness players still found to be lending to bush-bulldozing businesses. Two years on from the Australian Conservation Foundation's first foray into the financing of destructive land clearing, a follow-up report points to sluggish progress. Destruction of bushland for grazing, real estate and other development contributes to climate change and threatens species, such as the endangered pink cockatoo, as well as undermining Australia's international commitments to halt and reverse biodiversity loss. Deforestation also poses material risks to banks, ACF corporate responsibility policy analyst Audrey van Herwaarden told AAP. Mature trees are important for soil integrity, she said, as well as protection from extreme weather. Landowners with poorer soil and less productive land are more likely to miss repayments, manifesting as a credit risk to the bank. Reputational risk are also at play, with landowners caught land clearing illegally forced to pay steep remediation costs. The five big agribusiness players, ANZ, Westpac, Commonwealth Bank, National Australia Bank and Rabobank, were linked to cases of deforestation via mortgages over land titles in the 12 months from July 2023. Bank loans through securities on title are a common method for financing deforestation but the environmental group stressed it could not be certain the loans were used for bulldozing. Several mortgages were issued or reissued during or after the destructive landclearing had taken place, raising "serious questions about due diligence or, worse, wilful ignorance". Nearly half the cases might have been in breach of federal nature laws and the environment group had reported them to the relevant department. "Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," Ms van Herwaarden said. NAB, a major agribusiness lender, was twice as exposed as its peers across the 100 cases of deforestation from around the country. A spokesperson said the bank was addressing many of the report's recommendations, including doing more to engage stakeholders and investing in geospatial tools. "NAB is Australia's largest lender to agriculture and we understand deforestation is a complex issue that requires collaboration across government, industry and landholders," the spokesperson said. As well as calling on banks to commit to eliminating deforestation from their lending portfolios - a move already taken by Westpac - the environmental group also wants government to step up. A national strategy to end deforestation by 2030 is a key request, as well as executing on long-delayed reforms to broken nature laws. Both Commonwealth Bank and ANZ pointed to their social and environmental policies that dictate how they support their customers to manage deforestation risks. Australian banks have been slow to trim exposure to deforestation, with big agribusiness players still found to be lending to bush-bulldozing businesses. Two years on from the Australian Conservation Foundation's first foray into the financing of destructive land clearing, a follow-up report points to sluggish progress. Destruction of bushland for grazing, real estate and other development contributes to climate change and threatens species, such as the endangered pink cockatoo, as well as undermining Australia's international commitments to halt and reverse biodiversity loss. Deforestation also poses material risks to banks, ACF corporate responsibility policy analyst Audrey van Herwaarden told AAP. Mature trees are important for soil integrity, she said, as well as protection from extreme weather. Landowners with poorer soil and less productive land are more likely to miss repayments, manifesting as a credit risk to the bank. Reputational risk are also at play, with landowners caught land clearing illegally forced to pay steep remediation costs. The five big agribusiness players, ANZ, Westpac, Commonwealth Bank, National Australia Bank and Rabobank, were linked to cases of deforestation via mortgages over land titles in the 12 months from July 2023. Bank loans through securities on title are a common method for financing deforestation but the environmental group stressed it could not be certain the loans were used for bulldozing. Several mortgages were issued or reissued during or after the destructive landclearing had taken place, raising "serious questions about due diligence or, worse, wilful ignorance". Nearly half the cases might have been in breach of federal nature laws and the environment group had reported them to the relevant department. "Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," Ms van Herwaarden said. NAB, a major agribusiness lender, was twice as exposed as its peers across the 100 cases of deforestation from around the country. A spokesperson said the bank was addressing many of the report's recommendations, including doing more to engage stakeholders and investing in geospatial tools. "NAB is Australia's largest lender to agriculture and we understand deforestation is a complex issue that requires collaboration across government, industry and landholders," the spokesperson said. As well as calling on banks to commit to eliminating deforestation from their lending portfolios - a move already taken by Westpac - the environmental group also wants government to step up. A national strategy to end deforestation by 2030 is a key request, as well as executing on long-delayed reforms to broken nature laws. Both Commonwealth Bank and ANZ pointed to their social and environmental policies that dictate how they support their customers to manage deforestation risks.
Perth Now
4 hours ago
- Perth Now
Long way to go to stop lending for deforestation
Australian banks have been slow to trim exposure to deforestation, with big agribusiness players still found to be lending to bush-bulldozing businesses. Two years on from the Australian Conservation Foundation's first foray into the financing of destructive land clearing, a follow-up report points to sluggish progress. Destruction of bushland for grazing, real estate and other development contributes to climate change and threatens species, such as the endangered pink cockatoo, as well as undermining Australia's international commitments to halt and reverse biodiversity loss. Deforestation also poses material risks to banks, ACF corporate responsibility policy analyst Audrey van Herwaarden told AAP. Mature trees are important for soil integrity, she said, as well as protection from extreme weather. Landowners with poorer soil and less productive land are more likely to miss repayments, manifesting as a credit risk to the bank. Reputational risk are also at play, with landowners caught land clearing illegally forced to pay steep remediation costs. The five big agribusiness players, ANZ, Westpac, Commonwealth Bank, National Australia Bank and Rabobank, were linked to cases of deforestation via mortgages over land titles in the 12 months from July 2023. Bank loans through securities on title are a common method for financing deforestation but the environmental group stressed it could not be certain the loans were used for bulldozing. Several mortgages were issued or reissued during or after the destructive landclearing had taken place, raising "serious questions about due diligence or, worse, wilful ignorance". Nearly half the cases might have been in breach of federal nature laws and the environment group had reported them to the relevant department. "Our analysis shows banks still have a long way to go to mitigate the risks - and seize the opportunities - associated with their impacts and dependence on nature," Ms van Herwaarden said. NAB, a major agribusiness lender, was twice as exposed as its peers across the 100 cases of deforestation from around the country. A spokesperson said the bank was addressing many of the report's recommendations, including doing more to engage stakeholders and investing in geospatial tools. "NAB is Australia's largest lender to agriculture and we understand deforestation is a complex issue that requires collaboration across government, industry and landholders," the spokesperson said. As well as calling on banks to commit to eliminating deforestation from their lending portfolios - a move already taken by Westpac - the environmental group also wants government to step up. A national strategy to end deforestation by 2030 is a key request, as well as executing on long-delayed reforms to broken nature laws. Both Commonwealth Bank and ANZ pointed to their social and environmental policies that dictate how they support their customers to manage deforestation risks.
News.com.au
2 days ago
- News.com.au
Criterion: Back up the dumpster! It's time for an EOFY share purge
Potential tax loss selling candidates include ASX200 inclusions Domino's Pizza Enterprises and IDP Education Investors may want to offset capital gains from successful AI and Trump-related plays But beware: tax-loss selling is governed by ATO rules Tax-loss selling is a fine judgment call, because the dud shares can be on the cusp of a brilliant recovery. In some cases, their worth has been further devalued by EOFY selling that in theory will ease after June 30. But for investors sitting on capital gains from an AI driven splurge on data centres or a fear-driven plunge into gold, offsetting the gains by selling the lost causes makes sense. Or maybe hey want to lighten up on Commonwealth Bank (ASX:CBA) shares and offset the healthy gains Investors must ensure they are genuinely exiting the position, with the taxman's 'wash' rules preventing repurchasing within 45 days. Even then, investors must justify their action, such as independent research changing a call on a stock from 'sell' to 'buy'. Domino's prospects are as flat as its pizza Amid a string of downgrades, Domino's Pizza Enterprises (ASX:DMP) shares have lost 88% of their value since peaking in September 2021. Domino's problems include underperforming French and Japanese operations, while measures including store closures have failed to turn the company's fortunes. Long-time CEO Don Meij departed in November last year, while the Europe and Japan chiefs have also left the building. As with McDonald's decades previously, Dominos mastered the art of industrial scale, ultra fast production. Maybe the world has reached peak pizza … if that's possible. Busted flush Having seen 70% of the value of their holdings vanish over the past year, Star Entertainment Group (ASX:SGR) investors would have been better off at the blackjack table … and that's not saying much. The owner of gambling dens in Sydney, Brisbane and the Gold Coast, Star was crippled by money laundering and other governance controversies. Star is subject to a convertible note/debt-based rescue bid from US casino operator Bally's Corporation. An independent expert report dubs the proposal as 'not fair' to shaeholders but 'compelling' nonetheless, given the company's dire position. Investors should take the hint. Also pinged for money laundering transgressions, SkyCity Entertainment Group (ASX:SKC) last month warned of 'deteriorating' trading conditions at its Auckland and Adelaide casinos. Skycity shares have fallen 36% over the year. Morningstar dubs them as 'materially undervalued', but the company's luck doesn't look like turning any time soon. A sobering lesson Shares in overseas student wrangler IDP Education (ASX:IEL) plunged 50% after a June 3 profit warning, erasing $1 billion of value. IDP has nowhere to run, with its key geographies of Canada, Australia, the UK and the US all executing migration crackdowns. Overseas students made for a once thriving export industry, but the crackdown has cooked and plucked that golden goose. IDP remains the industry leader and management points to a recovery. The stock remains one class worth wagging, in our humble view. The stock has lost an astonishing 75% over the last year. Shooting Bambi Selling CSL (ASX:CSL) shares is like shooting Bambi, given the almost certain demand for its life-saving plasma derived products. Once the biggest ASX company, CSL has lost 17% of its value because of weakness in its Seqirus flu vaccine division and its acquired Vifor kidney health arm. Lingering concerns over Donald Trump's tariff and drug pricing have also weighed on sentiment. Broker Wilsons describes CSL as 'thorougly over owned'. But - hey - the experts said the same about CBA shares, which continue to defy gravity. Cochlear (ASX:COH) shares also are off the pace. In an earnings downgrade last week, the company noted weakness in developed markets for implant and sound processor sales. New implant and processor products might put things right, but so far investors aren't listening. Small cap cleanout candidates Call recording house Dubber Corp (ASX:DUB) in March 2024 discovered that $30 million of funds had gone missing. This week, the company said it would sue its external auditors over the unrecovered $26.6 million. But with investors sitting on an 80% loss since the incident, they probably should hang up. In the retail sector, shares in plus-sized clothier City Chic Collective (ASX:CCX) have shrunk 35% over the year and 97% over five years. The company recently warned of poor trading here and in the US, while tariffs are a worry. Weight Watchers filed for US bankruptcy in May and Ozempic sales are booming, so maybe there's a nexus. Owner of Kathmandu, KMD Brands (ASX:KMD) on Thursday signalled peak puffer jacket with a weak earnings outlook.
