Two things happened in the same week that most Australians missed. A non-major bank launched a 40-year investor loan. Banks across every tier started cutting fixed rates. Together they signal something significant about where the lending market is heading and what it means for property investors right now.
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AMP Bank has launched a new investor loan product called Equity Flex with a 40-year term and an initial interest-only period of up to 10 years, without requiring borrower reassessment during that period.
The key details:
This is not a product for owner-occupiers or investors with a 10% deposit. The 80% maximum LVR requirement means you need at least a 20% deposit to access it. But for investors with equity in existing properties, the implications for borrowing capacity are meaningful.
This is where it gets technical and where most coverage of this product misses the important detail.
When a bank assesses your borrowing capacity on an interest-only loan, they do not base repayments on the full loan term. They subtract the interest-only period from the total term and assess your ability to repay the principal over the remaining years.
On a 40-year loan with a 6-year interest-only period, the bank assesses repayments over 34 years rather than 40. That is only modestly longer than a standard 30-year loan with no interest-only period.
The practical effect is a moderate increase in borrowing capacity rather than a dramatic one. In a market where every dollar of additional borrowing capacity counts, moderate is still meaningful. The more significant development is not the 40-year term itself but what it signals about the direction of lending policy.
The 40-year AM Bank product launched the same week that lenders across every tier, major banks, second-tier lenders, and non-bank lenders, started cutting fixed-rate products.
When banks offer a two-year fixed rate below the current variable rate, they are not doing borrowers a favour. They are expressing a view that variable rates will fall further than the fixed rate discount over that period. If a lender is offering a two-year fixed rate at 6.5% when the variable rate is 6.8%, they believe rates will fall by more than 30 basis points over two years and they want to lock in the margin before that happens.
Every lender cutting fixed rates right now is effectively betting that the RBA will cut the cash rate materially over the next 12 to 24 months. That consensus across lenders of every size and tier is one of the clearest signals available that rate cuts are coming.
The lending environment is shifting before the RBA has moved the cash rate at all.
Banks are competing aggressively for market share. They are extending loan terms. They are cutting fixed rates. They are reducing servicing buffers. Each of these changes individually would be notable. All of them happening simultaneously points to one conclusion: lenders expect conditions to improve materially and they want to capture as much of the resulting demand as possible before their competitors do.
The housing market correction that many Australians have been hoping would reach 30 to 40% is looking increasingly unlikely to get there. The more realistic outcome based on current lending policy direction is a correction of approximately 10% in Sydney and Melbourne, with smaller capital cities and regional markets largely unaffected.
When borrowing capacity increases, more buyers can transact. When more buyers can transact in a market with limited supply, prices respond. The investors who position themselves now, before sentiment fully recovers, are buying ahead of that response.
More borrowing capacity does not mean every property is worth buying. In a market with significant volumes of stock that has been sitting unsold for extended periods, the quality gap between properties has widened.
Not everything on the market right now deserves to be purchased. Some of it is there because it was overpriced at the peak and vendors are still anchored to those prices. Some of it has genuine structural weaknesses in demand, location, or property quality that no amount of improved lending conditions will resolve.
The combination of improved borrowing capacity and motivated vendors creates an opportunity for investors who can identify quality assets at reasonable prices. It does not create an opportunity in every property in every market.
Getting the asset selection right matters more in this environment than in a rising market where almost everything performs. In a recovering market, the right assets significantly outperform. The wrong assets do not recover at all.
Rate cuts are forecast for 2027. Servicing buffers are already being reduced. Fixed rates are being cut across every lending tier. Borrowing capacity is increasing before the RBA has moved at all.
When rate cuts arrive and consumer confidence recovers, the investors who are already positioned in quality assets will benefit from the combination of improving cash flow through rising rents and recovering values through increased buyer demand.
The investors waiting for a crash that is not coming will be competing against everyone else to buy at higher prices once the recovery is obvious to everyone.
The window between now and that recovery is where serious portfolios get built.
At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our buyers agents have helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.
Book an investment assessment call with Search Property. We'll discuss your goals and position, and help you build a clear plan to move forward with confidence.
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
