Australia's interest-only mortgages
Our infographic explains how interest-only mortgages have grown
in Australia, how much people are borrowing for an interest-only
loan and how much you will really pay for this type of loan.
interest-only mortgages (Accessible text version)
The average interest-only mortgage is $430k (2014).
For owner-occupiers - 1 in 4 loans are interest-only.
For investors - 2 in 3 loans are interest-only.
Total amount borrowed in interest-only mortgages
- $88.7 billion in 2012
- $153.8 billion in 2015
Pitfalls of interest-only mortgages
- Higher repayments when interest-only period ends
- More expensive over life of the loan
- Principal will not reduce
Benefits of interest-only mortgages
- Lower repayments at start of the loan
- Can be used for investing and tax purposes
- Money saved can help pay off other high-interest credit
Journey of interest-only loan borrowers
Each borrow $500,000 at 6% over 30 years (3)
||Principal and interest
||Interest-only for 5 years
||Interest-only for 10 years
||Interest-only for 15 years
|Monthly repayments during interest-only period
|Monthly repayments after interest-only period
|Total repayments made
|Additional interest paid due to the interest-only period
Before you get an interest-only
Things to consider:
- Can I afford the higher repayments when the interest-only
- Can I trust myself not to dip into my offset account?
- Will the short-term benefits outweigh the long-term costs?
What can you do to get a home loan?
- Reduce costs - use an offset account to lower
- Review your plan - expand your search for
properties and locations
- Better rate - shop around for a loan with a
lower interest rate
Use our interest-only mortgage
calculator to find out what it will really cost you.
(1) ASIC survey of 11 lenders, 2015, data not publically
(2) APRA, Quarterly authorised deposit-taking institution property
exposures: June 2016
(3) Calculations using ASIC's MoneySmart interest-only mortgage
calculator (excluding fees)
Last updated: 23 Mar 2017