How investor’s monthly loan repayments went from $2000 to $8700

In the space of a year, the monthly repayment property investor Matthew Ryan will be making on a $1.1 million home loan will more than quadruple.

Ryan said he narrowly secured an interest rate of 2.19% on the loan while rates were at their pandemic-era low.

He fixed for a year, and when that term is up in late September, he will be looked at re-fixing at 4.95% – more than double the rate he had been paying.

Adding to the monthly repayments, Ryan would also be transferred from interest-only repayments to principal and interest.

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Property investor Matthew Ryan provides his predictions for the housing market as prices fall and auction clearance rates drop. Video first published April 4, 2022.

The double-whammy would result in his monthly repayment on that loan jump from just over $2000 to just over $8700.

He said he could reapply for the loan and attempt to hold onto interest-only repayments, but banks were moving away from such arrangements as the market fell.

“When the market’s flying they go: ‘Oh well, the property values are going up, we have security, we’re not too worried about whether people are paying the principal back,” he said.

“When the market starts falling, and we’re in the situation we are now, they start saying: ‘Oh no, we’re a little bit worried, we want to start to get some of our money back.”

Ryan said the loan was currently held against two of his Wellington properties, one on Koromiko Rd in Aro Valley, and one on Moana Rd in Plimmerton.

He said all the banks were clamping down on interest-only repayments, which he said could become a problem for smaller or less experienced investors and highly leveraged investors, as they were also hit by rising interest rates.

But he had relatively low borrowing compared to the value of his portfolio, so the higher repayments would not be too damaging.

“This shift from interest-only to principal and interest and the rising cost of interest, could be pretty detrimental to people who aren’t doing this full time.”

The same situation could prove “seriously dire” for recent first home buyers, many of whom were feeling the sting of renewing at rates that have doubled.

This property in Plimmerton is one of two that Ryan's loan is held against.


This property in Plimmerton is one of two that Ryan’s loan is held against.

He said a $1.1 home loan was not uncommon for homeowners during the frenzied housing markets of 2020 and 2021.

”During the GFC (global financial crisis), which was the last market correction, interest rates started off at that kind of 7-8% and the Government could quickly start reducing them to make things more affordable,” Ryan said.

”Now, (first home buyers) are facing a situation where rates haven’t gone up 10% or 20%, they’ve gone up 150%, and they’ve gone up that in less than a year.”

Prediction interest rates would stay low

Ryan said he had expected interest rates to stay low for a considerable time, and all signs seemed to be pointing that way.

“A year ago I could easily have locked in for maybe 2.49% or 2.5% for two years.”

“Categorically, I am the first to say I got it 100% wrong, but then again I know people I would say are very astute of swap rates and interest rates, and they all got it wrong as well.”

He said many had made the same bet he had, which would likely leave them struggling.