"Bulimia" on Interest Only (IO) Loans

June 19, 2017
Raymond Teh

In April 2017, the banking regulators put in place a limit on IO repayment loan that can be sold to 30% of total new residential mortgages.  IO  loans traditionally constitute 40% of all mortgages.  In simplistic term, lenders have to coax 25% of borrowers on IO to principal & interest repayment (P+I).   

If you are on an IO standard variable loan with any of the major 5 lenders and willing to switch to P+I, rates will automatically reduce by:

                            Owner Occupied                  Investment

ANZ                      0.55%                                 0.46%

CBA                      0.22%                                 0.14%

NAB                      0.10%                                 0.10%

Westpac                0.17%                                 0.17%

St George              0.20%                                 0.20%

Switching to P+I for an investment mortgage may not be viable if your owner occupied mortgage has not been extinguished.  Speak to your financial planner or accountant before making any changes.

Posted in: Interest rates

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