What to look out for
Because of these changes, borrowers need to keep a close eye on what rate their bank is charging as there could be a significant difference between what they are paying, what their bank can offer and what is on the market.
Interest only loans are generally only available for five years and then will revert to principal and interest. This can be a significant difference in repayments, so for example repayments on $500,000 over a 25 year loan term are just under $1,000 per month, which can be a financial burden if not accounted for. RBA figures show that there will be approx. $120 billion of interest only loans reverting back to principal and interest over the next three years.