APRA announces removal of 30% interest-only lending cap from January 2019

The Australian Prudential Regulation Authority (APRA) has today announced a plan to remove its 30% benchmark on interest-only residential mortgage lending from January 1, 2019.

The temporary ‘speed limit’, originally introduced in March 2017, was implemented by APRA in response to concerns over lending practices by Aussie banks and the soaring cost of property prices in major cities at the time.

RELATED: Give yourself a Christmas bonus with this easy home loan trick

According to the authority, since its introduction the lending cap has led to a ‘marked reduction’ in the proportion of new interest-only lending, which now sits well below the 30% threshold.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” said APRA Chairman, Wayne Byres, in a statement released this morning.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

What could the move mean for interest-only rates?

Since March 2017 when APRA’s measures were first put in place, interest-only home loan rates for both owner occupiers and investors have jumped.

According to the Mozo database, the average interest-only rate for an owner occupier (based on a loan amount of $400,000 and an LVR of 80%) in March 2017 was 4.50%*, while the current average is 4.83%.

The same upwards trend has played out for investor interest-only loans, with the average rate in the Mozo database having soared from 4.75% in March 2017 to a current average of 5.12%.    

However, according to Mozo’s Product Data Manager, Peter Marshall, that trend might be about to reverse for investor interest-only home loans.

“Rates have already been falling for investors making principal and interest repayments, but APRA’s announcement is likely to result in lenders reducing interest-only rates, mostly for investors,” he said.

“Owner occupiers can still expect to pay a decent premium for interest-only loans, but I think investor interest only rates are likely to start coming down by a meaningful amount.”

RELATED: Bargains to record breakers: Australia’s cheapest and most expensive properties of 2018

Is investing in property one of your goals for 2019? Find a home loan to match your ambition by checking out some of the hot investor offers below, or head over to the Mozo home loan comparison hub for even more great offers.

*Rates have been rounded to two decimal places.  

Home loans today - last updated 3 December 2023

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Home Variable Rate

    Owner Occupier, Principal & Interest, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    6.15% p.a. variable
    6.15% p.a.

    Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.

  • Offset Home Loan

    Package, Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.39% p.a.

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Flex Home Loan

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.19% p.a. variable
    6.43% p.a.

    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.

  • Mozo Expert Choice Badge
    Variable Rate Home Loan Special Offer

    Package, Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.51% p.a.

    Package benefits across Home Loans, Visa Credit Card, Personal Loans and Term Deposits. No package fee for the first year. No application, settlement or redraw fees to pay. Quick and easy application. Free CoreLogic RP Data property reports. *Terms, conditions and lending criteria apply.


* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.