Suncorp, the nation's fifth-largest mortgage lender, will today announce it is cutting interest-only investment loans on two and three-year rates by between 20 and 30 basis points.

'Highly competitive space'

The headline new interest-only two and three year fixed rates will be 4.34 per cent.

Other lenders are also lowering rates, fees or easing conditions or fees in a bid to boost investor lending.

Teachers Mutual Bank, one of the nation's largest mutuals, is cutting investor loans for principal and interest buyers by 20 basis points for its variable product and fixed rates from one to five years.

The bank, which includes UniBank and Firefightes Mutual Bank, is also reducing the minimum monthly surplus for residential investment loans for both principal and interest and interest-only from $1000 to $300.

Pepper Money, a major non-authorised deposit taking institution, has cut $1800 of establishment, title protection and legal fees.

"We've been waiting for lenders to drop their rates and improve their terms," said Mr Lusi. "This is going to be a highly competitive space again."


Australian Prudential Regulation Authority last month announced the lending cap, which was introduced in 2014 and required banks to limit growth in lending to housing investors to 10 per cent, had "served its purpose" and big banks had improved lending standards.

Any bank that can prove its investor loan book has been growing below the benchmark for at least the past six months, and can show it has met APRA's requirements on serviceability, can have the cap removed.

It will be replaced with a series of more permanent measures to keep lending standards strong.

APRA said it wants banks to set internal limits on the proportion of new lending they do to borrowers with very high debt-to-income, and set limits on maximum debt-to-income levels for individual borrowers.

Chairman Wayne Byres warned the lending "environment remains one of heightened risk and there are still some practices that need to be further strengthened".

Analysts claim the removal of the cap would be offset by a tightening in lending standards.

Investor housing finance commitments had plunged by nearly 18 per cent below peaks following higher mortgage rates to investors and other policy constraints restricting lending, according to CoreLogic, which monitors pricing.

But despite the fall investor lending accounted for more than 44 per cent of total new lending – excluding refinancing – during February, which was well above the long-term average of 34 per cent, its research shows.

Melbourne and Sydney, which are the most active real estate markets, were the hardest hit, it claims.