Banks loosen the reins on interest-only lending

Alex Ritchie

Alex Ritchie

( 2 min read )

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The Reserve Bank of Australia has today left the cash rate on hold at 1.5 per cent, but banks have been making significant cuts to interest-only rates across the market. 

Australia’s biggest bank, CBA cut their 2-year fixed interest only investor rate from 4.84 per cent to just 4.34 per cent on Friday – a massive drop of 50 basis points. 

Westpac also joined the movement, cutting the same loan by 14 basis points, while smaller lenders such as ING, St George, Aussie Home Loans, Mortgage House and Virgin Money have also dropped some interest-only rates over the last month.’s money editor Sally Tindall said the tide was turning for interest-only lending. 

“It’s been a tough year for home owners looking for interest-only lending who have had to endure at least one, if not multiple, out of cycle rate hikes,” she said. 

“This is the first sign of a reprieve. 

“These rate cuts suggest banks are looking to accept more interest-only loans on their books after overshooting on APRA’s 30 per cent cap on new interest-only lending. 

“The latest APRA data shows the number of new interest only loans from authorised deposit-taking institutions dropped from 36.26 per cent in March 2017 to 16.91 per cent in September 2017. 

“Interestingly, CBA has reversed their 2017 rate hikes on their 2-year fixed interest-only loan, so it’s now the same rate as it was in February of last year. 

“Those lenders who have room to move in their interest-only lending limits are likely to join in on these interest-only rate cuts,” Ms Tindall said. 

The latest interest-only rates can be found at here. 

Interest-only fixed rate cuts







Investment home loan 2-year fixed





Fixed rate investment property loan 2-years




St George

Fixed rate investment property loan 2-years





IQ Basic Investment Loan Fixed 1-year




Source: RateCity data


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