It turns out, Australia’s property boom is doing more than bumping up prices, it’s reshaping family planning too.
With the cost of an average home now nearly $800K, young Australian’s are hitting pause on parenthood. Our fertility rate has slipped to just 1.51 children per woman, well below the 2.1 needed to sustain our population.
Interestingly, it’s regional areas that are doing the heavy lifting, with stronger fertility rates helping to offset the population slowdown in the major cities. Still, with rising property costs spreading beyond metro borders, even country families are feeling the pinch.
So while we’re all about negotiating interest rates and deposit strategies, remember this: the checkout line for uninterrupted Netflix binges just got longer for a whole generation wondering if children are a luxury they can really afford right now.
In this week’s newsletter, we look at why rates for investment property loans typically differ from rates for owner occupier loans.
Investment loans usually price higher than owner-occupied loans because they’re riskier and costlier for banks to hold.
APRA’s capital rules.
APRA’s capital rules explicitly differentiate lower-risk owner-occupied principal-and-interest (P&I) loans from other residential exposures (like investment or interest-only), requiring more regulatory capital for the latter, with banks passing that cost on via a higher rate.
Interest-only terms (common among investors) also increase risk because debt isn’t amortised early, which APRA and the RBA have long flagged as a vulnerability.
Indicative variable rates.
- CBA: Owner-occupied from 5.34%, Investor 5.69%
- Westpac: Owner-occupied 5.84%, Investor 6.09%
- NAB: Owner-occupied 6.44%, Investor 6.96%
- ANZ: Owner-occupied 5.64%, Investors 6.05%
Treatment of rent.
Banks don’t count 100% of rental income in serviceability, they apply a haircut to allow for vacancies, arrears, management fees and upkeep.
Typical shading by lenders is 70–80% of gross rent. For example, $600/week becomes $420–$480/week in the calculator.
The exact haircut can vary by lender and evidence type (signed lease vs agent estimate), property type (e.g., short-stay often shaded more), and whether other rental expenses are already captured.
The lender’s credit policy for the precise percentage is often a consideration when we’re identifying a lender for our clients.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
