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Interest-only mortgage rates rising for some, falling for others

Nick Bendel avatar
Nick Bendel
- 2 min read
Interest-only mortgage rates rising for some, falling for others

As Australia’s interest-only crackdown passes its one year anniversary, it turns out that interest-only mortgage rates for investors have been quietly falling.

Interest-only home loan rates for investors increased between April 2017 and November 2017 – but then decreased between December 2017 and March 2018 (see table below).

At the end of March 2017, the average interest rate for all the interest-only investor mortgages listed on RateCity was 4.64 per cent.

That climbed to 5.08 per cent at the end of November 2017, before gradually falling to 5.02 per cent at the end of March 2018.

Interest-only home loan rates started rising after 31 March 2017, when the banking regulator, APRA, called on home loan lenders to restrict their interest-only lending – particularly for investors.

Over the next eight months, the average interest rates for interest-only home loans listed on RateCity rose by 44 basis points for investors and 29 basis points for owner-occupiers.

But in the four months after that, interest-only rates fell by six basis points for investors even as they climbed by two basis points for owner-occupiers.

The differential between owner-occupiers and investors for interest-only home loan rates has also closed.

At the end of March 2017, the differential was 25 basis points, with investors paying 4.64 per cent and owner-occupiers 4.39 per cent.

It peaked at the end of October 2017, when investors were paying an extra 43 basis points – 5.00 per cent versus 4.57 per cent.

At the end of March, the differential had narrowed to 32 basis points – 5.02 per cent versus 4.70 per cent.

Date (end month)Owner-occupiersInvestorsDifferential
March 20174.39%4.64%0.25%
April 20174.43%4.77%0.34%
May 20174.44%4.81%0.37%
June 20174.51%4.90%0.39%
July 20174.55%4.97%0.42%
August 20174.58%5.01%0.43%
September 20174.57%5.00%0.43%
October 20174.57%5.00%0.43%
November 20174.68%5.08%0.40%
December 20174.68%5.07%0.39%
January 20184.69%5.06%0.37%
February 20184.70%5.06%0.36%
March 20184.70%5.02%0.32%

Disclaimer

This article is over two years old, last updated on April 8, 2018. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.

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This article was reviewed by Property & Personal Finance Writer Nick Bendel before it was published as part of RateCity's Fact Check process.

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