Investors have better repayment records than home-loan borrowers so why are they paying more?

Investors have a better repayment record than home-loan borrowers yet they pay a higher rate. Why?

Investors have a better record of repayment than homebuyers.

Investors pay a higher mortgage rate than home-loan borrowers. However, this was not always the case and there is now a solid argument to suggest that investors should pay less.

In reality, the repayment statistics for investors are better than the same numbers for homeowners – but investors get no reward for their better performance.

My guest today on the Money Puzzle podcast, is Cameron Kusher, executive manager, economic research at the REA group, who says investor lending statistics are consistently more reliable than home loan borrowers.

What’s more, he argues that a more competitive and transparent lending market for investors would stimulate the sector. Ultimately, more investors would improve supply, which is the outstanding problem right now as renters face vacancy rates of just 1 per cent.

Kusher says loan rates were artificially adjusted between home-loan borrowers and investors some years ago as a regulatory move but the logic of that time is no longer relevant. He says investors are more likely to sell properties if they face trouble avoiding defaults.

“Investor repayment patterns are often better, they could be paying a lower rate, but at the very least they should be paying the same, not higher,” Kusher says.

But would the banks take the risk of imposing market economics inside the highly political mortgage market? We’ll have to wait and see.

Who is the guest?

Cameron Kusher is the chief economist at REA.

Why him?

Cameron is a specialist in the economics of the residential market with unique access to the raw data collected by one of the biggest players in the market. (REA is a subsidiary of News Corporation, the owner of The Australian),

What are the topics this week?

1 What is the nature of the market recovery we are witnessing this year?

2. Is the recovery showing conventional patterns or any variations we should consider?

3. Banks are raising rates but loosening lending conditions. What is in this for the investor?

4. What are the regional variations in the market?

Question of the week

Regular listener Alex asks: “Did investors always have to pay higher rates than home buyers. Why are they higher?”

Questions for the podcast are welcome at [e-mail]