Westpac has announced cuts of up to 0.50% to its fixed investment rates in a bid to stay competitive and attract new borrowers in the stagnating subsection of lending.
Reductions were made across both its package and non-package fixed investment interest rates.
“You know the home loan market has become competitive when a loan from a major bank has the top rate in its category,” said Canstar group executive of financial services Steve Mickenbecker.
The cuts were between 0.19% and 0.50% across all terms for both interest only and P&I repayments
“The investment lending market has remained sluggish, as lending to owner occupiers has shown recovery, and Westpac is clearly working to lift its share of that market," said Mickenbecker.
“Westpac has positioned itself in the lowest priced 10 loans in the market in all fixed investment loan categories."
However, while Westpac’s new rates are competitive, the comparison rates are much higher.
Mickenbecker explained, “Incorporating the $395 package fee and with a higher rate attaching when the loan moves to variable interest after the fixed rate period. Investors will have to be on their toes at the end of the fixed rate period to assure a competitive rate.”
While many economists predict an RBA cash rate cut next week, it likely wouldn't have a significant impact on investor activity.
“Rate cuts of the last 12 months have already provided encouragement for home owners and investors. With rates at all time lows, it's unlikely that further cuts will be the thing that brings investors back into the market,” said Mickenbecker.
Rather, the trajectory of housing values is a far more accurate indicator of investor behaviour.
“Investors will obviously be looking for improved rental returns following falls in Sydney and Melbourne, but ultimately it is the prospect of house price increases that brings investors out of hibernation," said Mickenbecker.
“We have seen promising indications that the house prices are on the march and my expectation is that we will see investors much more active in the market in 2020."