Westpac extends interest-only loans to investors with 10% deposit
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.
Investment property loan comparisons on Mozo
Promoted
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Unloan Variable
- Investment
- LVR <80%
- Interest rate
-
6.29
%
p.a.
Variable
- Comparison rate
-
6.20
%
p.a.
- Initial monthly repayment
-
$3,092
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.
- Interest rate
-
6.29
%
p.a.
Variable
- Comparison rate
-
6.20
%
p.a.
- Upfront fees
-
$0
- Ongoing fees
-
$0.00
- Discharge fee
-
$0.00
- Extra repayments
-
yes - free
- Redraw facility
-
yes - free
- Offset account
-
no
- Maximum loan to value ratio
- 80.00%
- Minimum borrowing amount
- $10,000
- Maximum borrowing amount
- $10,000,000
- Type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special offers
- -
Read our Mozo Review to learn more about this Unloan Unloan Variable
Go to site
-
Simple Home Loan Variable
- Investor
- Principal and Interest
- LVR<60%
- Interest rate
-
6.24
%
p.a.
Variable
- Comparison rate
-
6.27
%
p.a.
- Initial monthly repayment
-
$3,075
Enjoy a low variable rate with no application, ongoing or monthly fees to pay. Access your money via internet banking at any time with free redraws. Make additional repayments at any time. Available for owner occupied, investment and interest only repayments.
- Interest rate
-
6.24
%
p.a.
Variable
- Comparison rate
-
6.27
%
p.a.
- Upfront fees
-
$400
- Ongoing fees
-
$0.00
- Discharge fee
-
$175.00
- Extra repayments
-
yes - free
- Redraw facility
-
yes - free
- Offset account
-
no
- Maximum loan to value ratio
- 60.00%
- Minimum borrowing amount
- $150,000
- Maximum borrowing amount
- $3,500,000
- Type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special offers
- -
Read our Mozo Review to learn more about this First Option Bank Simple Home Loan Variable
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
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.
- Interest rate
-
6.29
%
p.a.
Variable
- Comparison rate
-
6.20
%
p.a.
- Upfront fees
-
$0
- Ongoing fees
-
$0.00
- Discharge fee
-
$0.00
- Extra repayments
-
yes - free
- Redraw facility
-
yes - free
- Offset account
-
no
- Maximum loan to value ratio
- 80.00%
- Minimum borrowing amount
- $10,000
- Maximum borrowing amount
- $10,000,000
- Type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Investor
- Repayment options
- Weekly, Fortnightly, Monthly
- Special offers
- -
Read our Mozo Review to learn more about this Unloan Unloan Variable
Go to site
Your selected home loans
* 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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