If you've compared home loan rates, you'll notice investment loans almost always cost more than owner-occupier loans. Interest-only investment loans cost more again. Here's why, and what you can do about it.
Why the gap exists
Regulatory capital
APRA requires banks to hold more capital against investment loans because they're considered riskier. Holding more capital costs the bank money, and that cost is passed on in the rate.
Higher risk in downturns
Historically, investors are more likely than owner-occupiers to stop paying when things go wrong, because it's not their home.
Past regulatory limits
From 2014 to 2018, APRA restricted investor lending growth and interest-only lending. Lenders priced these loans higher to manage volumes, and much of the pricing gap has remained.
How big is the gap?
It varies by lender, but investment P&I rates are often around 0.2% to 0.5% higher than owner-occupier P&I rates. Interest-only can add a similar margin on top.
On a $600,000 loan, a 0.30% rate gap adds roughly $120 a month, or about $1,400 a year, to principal and interest repayments.
Can you change your loan purpose?
You must tell your lender if a property's use changes. If you move out of your home and rent it out, the loan becomes an investment loan for pricing purposes. Many lenders will reprice it at investor rates.
Telling your lender is important. Using an owner-occupier rate on a property that's actually an investment can breach your loan terms.
How to get a sharper investment rate
- Lower your LVR. Rates are often lower at 70% or 60% LVR.
- Choose P&I if cash flow allows.
- Compare lenders. Investment pricing differs a lot between lenders.
- Ask for a discount. Investors with several properties and good history often have negotiating power.
- Review regularly. Investment loans suffer the loyalty tax too.
The tax angle
Interest on investment loans is generally deductible against rental income. From 1 July 2027, losses on established properties bought after 12 May 2026 generally can't be offset against other income. That makes the real after-tax cost of interest higher for those properties, so a lower rate matters even more.
Frequently asked questions
Will my rate change if I move out and rent my home?
Possibly. Many lenders reprice to investor rates when the purpose changes.
Are investor rates always higher?
Almost always, but occasionally a lender runs a promotion that narrows the gap.
Can I use an offset on an investment loan?
Yes, but it's usually better to keep savings offsetting your non-deductible home loan.
Want a sharper rate on your investment loan? Call Finfident on 0424 545 654 for a free investor rate review.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.