This article first appeared on awesomelendingsolutions.com.au.
Investment loan rates directly affect your cash flow and returns. Even a small difference can add up to thousands of dollars a year. But the "best" investment loan isn't just the one with the lowest rate. This guide explains how investment rates work and how to compare them properly.
Why are investment rates higher?
Lenders usually charge investors a little more than owner-occupiers. This is because:
- Investors are seen as slightly more likely to default in tough times
- Regulators expect banks to hold more capital against investor loans
- Investment loans are often interest-only, which carries more risk
The gap between owner-occupied and investor rates changes over time, so it's worth checking the current market.
What affects your rate?
Your rate depends on:
- Repayment type – interest-only rates are usually higher than principal and interest
- Loan to Value Ratio (LVR) – lower LVRs usually get better rates
- Loan size – larger loans may get bigger discounts
- Rate type – variable, fixed or split
- Your profile – income, credit history and portfolio size
- The lender – each has its own pricing and appetite for investors
Rates in 2026
The Reserve Bank raised the cash rate four times in 2026, to 4.60% at the end of September. Most lenders passed these rises on to variable rates. If you haven't reviewed your investment loan this year, you may be paying more than you need to.
How to compare investment loans
1. Compare the comparison rate
This includes most fees and gives a better picture of the real cost.
2. Check the interest-only terms
If you want interest-only, ask:
- How long can I have interest-only?
- What's the rate difference?
- What happens when it ends?
3. Look at features
- Offset account – useful, but for investment loans, an offset on your home loan is often more valuable
- Split loans – useful for different purposes
- Free extra repayments
4. Check lender policies
This is often more important than the rate for investors. Ask:
- How much rental income will you count?
- How do you treat negative gearing in serviceability?
- Do you accept my property type and location?
- How do you assess existing investment loans with other lenders?
Since February 2026, banks are limited in how much lending they can do where total debt is six or more times income. If you have several properties, some lenders may have more capacity than others.
5. Watch the fees
Annual package fees are common. On larger loans, a package can be worth it for the rate discount. On smaller loans, it may not be.
An example
Two investment loans on $600,000:
Loan A: 6.49% interest-only, $395 annual fee
Loan B: 6.69% interest-only, no annual fee
Interest cost per year:
- Loan A: about $38,940 plus $395 = $39,335
- Loan B: about $40,140
Loan A is around $800 cheaper each year, even with the annual fee.
Tax and your rate
Interest on investment loans is usually tax deductible. But the 2026 tax changes mean that for established residential properties bought after 7:30pm on 12 May 2026, losses can only be used against rental income or capital gains from 1 July 2027, not against your wages. This changes the after-tax cost of interest for some investors. A lower rate helps no matter which rules apply to you.
Ways to get a better rate
- Ask your current lender for a rate review
- Reduce your LVR below key thresholds (like 70% or 60%)
- Switch from interest-only to principal and interest if it suits your plan
- Use a broker to compare a wide range of lenders
Fixed or variable for investors?
Fixed rates give certainty for budgeting, which some investors value when rates are rising. Variable rates give flexibility to sell, refinance or pay down without break costs. Many investors split their loans.
Frequently asked questions
Is the lowest investment rate always best?
No. Lender policy and features can matter more, especially if you plan to keep buying.
Can I get owner-occupied rates on an investment?
No. If you rent out the property, it must be on an investment loan.
How often should investors review their rates?
At least once a year, and whenever the cash rate changes.
Do all lenders charge the same investor premium?
No. Some lenders price investors much more competitively than others, which is why comparing a wide range matters.
Will a lower rate improve my borrowing power?
Slightly, yes. Lenders assess your repayments at your rate plus 3%, so a lower rate can help a little with serviceability for future purchases.
Talk to Awesome Lending Solutions
Every situation is different, and the right loan depends on your goals, income and timing. At Awesome Lending Solutions, we compare a wide panel of lenders and explain your options in plain English, with no pressure. Call us on 02 7904 9560 or visit awesomelendingsolutions.com.au to book a chat.
This article is general information only. It does not consider your objectives, financial situation or needs, and it is not financial, tax or legal advice. Scheme rules, interest rates and laws were current as at October 2026 and can change. Speak with a licensed professional before making any decision. Albert Waldron is a Credit Representative (CR 407514) of AFG's Australian Credit Licence 389087.
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