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National Australia Bank has slashed 30 basis points from its basic variable investor loan even as wholesale funding costs seem set to rise. The cut is a sign that banks are preparing to compete for a greater share of the property investor market.
NAB cut the rate of its variable principal-and-interest loan for investors at an 80% or less loan-to-value ratio to 2.70% Friday, according to a report by The Australian. NAB currently offers the lowest rate for that class of loan among the big four banks, although smaller lenders still have lower offers.
NAB also cut its variable investor interest-only rate by 30 basis points to 2.99%.
The cuts come as fixed-rate mortgages begin to rise along with wholesale borrowing costs. Commonwealth Bank recently hiked its three- and four-year fixed rates, becoming the first of the big four to lift three-year rates from record lows.
Over the last two months, more investors have raised investor rates than cut them in the four- and five-year categories, The Australian reported. However, among short-term fixed rates for one to three years, the trend is still down.
According to RateCity.com.au, 21 lenders have cut at least one investor variable rate in the last two months.
Andy Kerr, NAB executive for home ownership, said the rate cut was spurred by the return of property investors to the market in the wake of COVID-19.
“These are our lowest ever advertised variable rates for property investors,” Kerr told The Australian. “The health and financial shock of the pandemic drove a decline in investor interest last year. However, this year we have seen the return of investors as economic conditions have improved.”
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Kerr also said that NAB had simplified its loan application approvals.
“We also know price is just one factor when getting a home loan and continue to simplify and improve the home lending experience for all our customers,” he said. “This includes faster decision-making, with a number of steps taken to simplify and speed up the time it takes for approval. Many of our customers are now receiving unconditional approvals within a day, giving them the confidence to act quickly in the market.”
RateCity.com.au research director Sally Tindall said that NAB was attempting to increase its share of the investor market as it surges. New lending to investors grew at the fastest rate in 18 years in March.
“Investors really have been storming back into the market over the last half-year,” Tindall told The Australian. “They had a brief retreat when COVID first hit, but as time progressed, we’ve seen a distinct rise in the number of loans being taken out by investors. We expect that trend to continue due to rising consumer confidence, but also because of property price growth forecasts of 19% in certain hot spots in 2021 alone – it really has investors thinking there are capital gains to be had.
“NAB wants a bigger slice of the action in the investor market and have been tweaking both their serviceability rules and their rates to attract new business after losing ground to its competitors in this area,” Tindall said.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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