Westpac extends interest-only loans to investors with 10% deposit

By Katherine O'Chee · · 4 min read
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Westpac is now opening its doors to property investors with smaller deposits. In the latest move to loosen its credit policy, the big bank has increased its loan-to-value ratio (LVR) cap for interest-only investment loans from 80% to 90%.

This means investors who have only saved up to 10% of the property value will be able to take out an interest-only loan with Westpac-owned subsidiaries including St George and Bank of Melbourne, or with any Westpac brand.

But for owner-occupiers, the maximum LVR for interest-only loans will remain the same at 80%. 

The change comes in light of falling interest rates and the Australian Prudential Regulation Authority’s (ARPA) decision late last year to remove the 30% cap on interest-only lending. Since June 1, the average rate for interest-only investment loans in Mozo’s database has dropped to 4.41% p.a., down from 5.04% p.a..*

RELATED ARTICLE: More Aussies are choosing to borrow with a 10% deposit says APRA, but are they forgetting one important thing? 

Mozo’s Property Expert, Steve Jovcevski said Westpac’s loosening of its credit policy is a step in the right direction and part of the big bank’s efforts to grow its investor customer base. 

“Now that Westpac allows a 10% deposit, all those people who thought they had to save up an extra 10% or wait a bit longer, can get into the market earlier and maximise capital growth over the next 12 months, especially with house prices going up in places like Sydney and Melbourne.” 

While having only a 10% deposit means you’ll have to pay Lenders Mortgage Insurance (LMI), Jovcevski believes the pros outweigh the cons. 

“Interest-only loans with a smaller deposit is an encouraging thing for investors because it allows them to make lower repayments, unlike principal and interest where you have to make higher repayments. This means they’ll have more available funds to purchase potentially another property or spend it on renovation,” he said. 

“Property investors who may have been wary about getting into the market with a 10% deposit - not because of the LMI, but because of the bigger principal and interest repayments - may now be enticed back into the market, thanks to the availability of an interest-only option which gives investors just starting out more breathing space.” 

And according to Jovcevski’s predictions, more and more banks will increase their LVR caps over the coming months while many lenders will continue to slash their interest-only rates. 

In fact, ANZ has already risen its LVR limit for property investors with interest-only loans to 90%, while customer-owned lenders P&N Bank and Newcastle Permanent made the same increase last month. 

So if you’re looking to take advantage of low interest rates and higher LVRs in the market, it could be time to hunt down a great deal for your next investment property. Compare investment loans below or head over to our investment loans comparison table for even more options.

Home loan comparisons on Mozo

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Last updated 27 July 2024 Important disclosures and comparison rate warning*

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  • Basic Home Loan

    • Investment
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.34 % p.a.
    Variable
    Comparison rate
    6.36 % p.a.
    Initial monthly repayment
    $3,108
    Go to site

    No annual or application fees. Competitive rate tiers based on your LVR as well as interest only and split repayment options. Fast application and turnaround process. Secure online application.

  • Neat Home Loan

    • Investor
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.24 % p.a.
    Variable
    Comparison rate
    6.26 % p.a.
    Initial monthly repayment
    $3,075
    Go to site

  • Unloan Variable

    • Investment
    • LVR <80%
    Interest rate
    6.29 % p.a.
    Variable
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,092
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Neat Home Loan

    • Investor
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.24 % p.a.
    Variable
    Comparison rate
    6.26 % p.a.
    Initial monthly repayment
    $3,075
    Go to site

  • Unloan Variable

    • Investment
    • LVR <80%
    Interest rate
    6.29 % p.a.
    Variable
    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,092
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Special Real Deal Home Loan

    • LVR<80%
    • Investment
    • Principal & Interest
    Interest rate
    6.29 % p.a.
    Variable
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $3,092
    Go to site

    Investors enjoy no monthly or annual fees to pay. Flexibility to choose your repayment schedule (weekly, fortnightly or monthly). Make regular additional repayments and extra lump sum payments. Split your home loan into multiple loan accounts.

  • Flex Home Loan

    • Investor
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.29 % p.a.
    Variable
    Comparison rate
    6.53 % p.a.
    Initial monthly repayment
    $3,092
    Go to site

  • Flex Home Loan

    • Fixed
    • Investor
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.29 % p.a.
    Fixed 3 years
    Comparison rate
    6.53 % p.a.
    Initial monthly repayment
    $3,092
    Go to site

  • Basic Home Loan

    • Investment
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.34 % p.a.
    Variable
    Comparison rate
    6.36 % p.a.
    Initial monthly repayment
    $3,108
    Go to site

    No annual or application fees. Competitive rate tiers based on your LVR as well as interest only and split repayment options. Fast application and turnaround process. Secure online application.

  • Offset Home Loan

    • Investment
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.34 % p.a.
    Variable
    Comparison rate
    6.59 % p.a.
    Initial monthly repayment
    $3,108
    Go to site

    Up to 10 offsets. Competitive rate tiers and interest only repayment option. No application fee. Split loan option. Fast, secure online application. $248 annual fee.

  • Basic Home Loan

    • Fixed
    • Investment
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.55 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,177
    Go to site

    Lock in repayments from 1 to 5 years. Competitive rate tiers depending on your LVR. No application or annual fee. Fast, secure online application.

  • Offset Home Loan

    • Fixed
    • Investment
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.55 % p.a.
    Fixed 3 years
    Comparison rate
    6.65 % p.a.
    Initial monthly repayment
    $3,177
    Go to site

  • SMSF Home Loan

    • LVR <70%
    Interest rate
    6.99 % p.a.
    Variable
    Comparison rate
    7.00 % p.a.
    Initial monthly repayment
    $3,323
    Go to site

    Enjoy a competitive rate on your SMSF home loan with Loans.com.au. Available for refinancers only. No application fee and no settlement fee. No monthly, annual or ongoing fees. Unlimited extra repayments. Online access via Smart Money App. 30% deposit required.

  • SMSF Home Loan

    • LVR <80%
    Interest rate
    7.49 % p.a.
    Variable
    Comparison rate
    7.50 % p.a.
    Initial monthly repayment
    $3,493
    Go to site

    Enjoy a competitive rate on your SMSF home loan with Loans.com.au. Available for purchase and refinance. No application fee and no settlement fee. No monthly, annual or ongoing fees. Unlimited extra repayments. Online access via Smart Money App. 20% deposit required.

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* 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.

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