Its owner-occupier and investor interest-only are increased by 30 basis points to 5.75 per cent and 6.26 per cent respectively.

The other three majors, Commonwealth Bank of Australia, Westpac and National Australia Bank, have made similar moves.

It heralds a new phase in the battle for market share in the property market as regulators impose growth speed limits and tougher terms and conditions on property investors.

Interest-only loans represent about one-in-four of owner-occupied lending and 64 per cent of all investor lending, according to the Reserve Bank of Australia.

MyState chief executive Melos Sulicich is warning the regulatory tightening has given the majors a huge competitive advantage that is inhibiting competition for borrowers and imposing financial obstacles for smaller lenders.

Repricing of the investor-only loan book is estimated to have provided an additional $490 million gross interest revenue a year, assuming a investor loan book of about $120 billion, which is reasonable for major lenders, analysis of Australian Prudential Regulation Authority data shows.

Savers' base rates are around 1 per cent, or half the rate of inflation, giving lenders plenty of fire power to target borrowers'.

Macquarie, which has been tightening lending terms and conditions over recent months, recently increased its new rate for investor interest-only loan with a loan to value ratio of 80 per cent, or less, to 4.39 per cent, a quarter-point rise.


It also said new borrowers seeking a loan will be asked for details on their spending in 12 separate categories covering household and discretionary spending to asses eligibility for a loan.

It also toughened lending terms and conditions, such as raising the size of deposits, for high rise and high density apartment dwelling in as many as 120 postcodes because of concerns about falling demand and oversupply.

They included Melbourne's World Trade Centre precinct, South Wharf, Southbank, Docklands, parts of South Yarra and South Melbourne and Chapel Street North.

In Sydney, the listings include The Rocks, Dawes Point, Haymarket, Millers Point and Sydney South.