Non-bank lender joins AMP Bank, Liberty, Pepper Money in a niche market
Non-bank lender Granite Home Loans will launch a 40-year home loan on 6 October, the latest Australian lender to stretch mortgage terms beyond the standard 30 years as rising rates squeeze borrowing capacity.
The ColCap Financial-owned brand announced its 40-Year Extended Home Loan alongside a decision not to pass on the Reserve Bank of Australia's (RBA) latest cash rate increase in full.
The loan is open to owner-occupiers and investors, can be used for construction and allows a maximum loan-to-value ratio (LVR) of 95% inclusive of risk fees. Owner-occupiers can take the full 40-year term up to age 45.
Granite will assess serviceability over a maximum 35 years. Interest-only periods run up to 10 years for investors but are capped at five years for owner occupiers.
Alongside lower monthly repayments, "the 10-year interest-only investor option may also support clients' tax planning following significant changes to the tax regime for property investors”, said Michael Csavas, chief commercial officer at ColCap Financial.
Those changes follow the Federal Budget's overhaul of negative gearing and capital gains tax, with tighter rules for buyers of established properties from 1 July 2027.
On pricing, Granite will add 0.05% to standard investment rates up to 80% LVR and 0.15% to standard owner-occupied rates for new loans. Above 80% LVR, it will leave rates unchanged or cut them by up to 0.65%.
Andrew Chepul (pictured), chief executive of ColCap Financial in Sydney, told MPA the appeal lies in affordability and flexibility.
"With a 40-year loan term, it's a way for lenders to improve the affordability by reducing, obviously, the minimum required repayments while still applying responsible lending assessments. I think in this environment where you've got cost of living pressures, oil price shocks, we’re providing a bit of flexibility."
He expects younger borrowers, first-time buyers and growing families to take up the offer.
Is a 10-year interest-only period risky?
With dwelling prices down for five straight months to August 2026, a decade without principal repayments raises the risk of negative equity. Chepul, however, said Granite's interest-only borrowers were typically ahead of schedule.
"A lot of them are two, three, four instalments in advance. So it's more about having the feature and the flexibility than it is that it's being aggressive."
Granite applies a 2% serviceability buffer – below the 3% the Australian Prudential Regulation Authority (APRA) expects of authorised deposit-taking institutions (ADIs) such as banks. As a non-bank, Granite is not subject to these buffer restrictions.
During an interest-only period the loan balance does not fall, so any drop in property values comes straight off the borrower's equity. The principal must then be repaid over a shorter remaining term, lifting repayments sharply when the interest-only period ends – the "repayment shock" regulators have long warned about.
On a $600,000 loan at 6.5%, interest-only repayments are about $3,250 a month. Switching to principal and interest over the remaining 20 years of a 30-year loan lifts that to about $4,470 – a jump of roughly $1,220 a month. Granite's 30-year principal and interest tail softens the step-up to about $3,790.
Regulators moved on these risks in the last decade.
Back in 2017, interest-only loans made up almost two-thirds of investor lending and 23% of owner-occupier lending, according to RBA data. In response, APRA asked ADIs to limit new interest-only lending to 30% of new housing loans each quarter.
The benchmark was removed in 2018 following “a marked reduction in the proportion of new interest-only lending”.
Who else offers 40-year mortgages in Australia?
Granite follows AMP Bank's launch of its Equity Flex 40-year investment loan in July 2026, which offers up to 10 years of interest-only repayments at a maximum 80% LVR. Unlike Granite's product, it is not available to owner-occupiers.
Great Southern Bank launched a 40-year variable home loan for first-home buyers in September 2025, for owner-occupiers aged 18 to 40 at up to 90% LVR. RACQ Bank also targets first-home buyers, while Pepper Money, Liberty and MA Money offer 40-year terms. None of the big four banks offers one.
