AMP Assesses Its 40-Year Investor Loan Over 30 Years. None of the Post-Budget Capacity Levers Touch the DTI Cap

The three levers brokers have been handed since 12 May

Investor files have been the hardest conversation in broking since the Budget. Borrowing capacity fell, sentiment fell further, and the lenders that want the volume have responded the way lenders always do — with product design. Longer terms. Longer interest-only periods. Sharper pricing at low LVRs. Assessment rates that sit closer to the actual loan rate.

Australian Broker reported on 7 September that brokers are seeing exactly this. Bryan Ong, founder, broker and adviser at Rise High Financial Solutions, told the publication: “Over the past two to three months, the budget has definitely shaken things up,” adding that “we’re seeing banks starting to come up with creative ways to help investors improve their borrowing capacity.” Joey Delis, a broker at Loan Market in Adelaide, put it more bluntly: “Business development managers for the banks are really proactive again.”

That is a genuine shift, and it is worth knowing about. But there is a problem sitting underneath it that has had almost no attention, and it matters more than any single product launch.

Of the three capacity levers now being offered to brokers on investor files, one may not increase capacity at all at the lender most associated with it. None of the three changes the borrower’s debt-to-income ratio. And DTI is the constraint that has had a hard regulatory cap on it since 1 February this year.

If you are reaching for a 40-year term to solve a servicing shortfall, it is worth being precise about what that term is actually doing — and what it is not.

What actually changed, and for whom

The measure that started this is narrower than the commentary suggests, and the boundaries matter on file.

From 1 July 2027, the ability to negatively gear residential investment property purchased from 7:30pm on 12 May 2026 is limited, other than for new builds. On established property bought after that moment, losses can only be offset against residential property income rather than salary or other personal income, with excess losses quarantined and carried forward to future years. Properties held at the announcement — including those under contract but not yet settled — are grandfathered and can continue to be negatively geared until sold. New builds retain both negative gearing and the CGT discount, with an indexation alternative announced alongside it. Trusts, superannuation funds including SMSFs, build-to-rent and government housing programs sit outside the measure.

Two points fall straight out of that for brokers.

The first is that your existing investor book is largely unaffected on the tax side. The client who bought in 2023 has not lost anything. That is a retention conversation and a reassurance conversation, not a restructure conversation.

The second is that the new-build carve-out is not a footnote. Hold that thought — it comes back later in a way that has nothing to do with tax.

The demand side is real, and the cause is contested

The volume effect showed up quickly. In Westpac’s third-quarter update on 10 August, chief financial officer Nathan Goonan reported that mortgage applications were down 20 per cent since the 12 May Budget — owner-occupier applications down 18 per cent and investor applications down 26 per cent — with monthly applications falling to around 26,000 from a June-quarter average of about 29,000, some 11 per cent below the five-year average.

Worth noting, because it has been widely misread: Goonan did not attribute that solely to the Budget. As reported by The Nightly, he said: “I guess we’d probably draw some conclusion from that that the rate impact is probably equal or potentially a bigger impact than anything that happened in the Budget.”

He has a point. The RBA lifted the cash rate to 4.35 per cent on 5 May 2026, a week before the Budget, and held there on 11 August with the Board stating it “will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.” Two forces landed on investor capacity inside seven days, and separating them is harder than the headlines allow.

For brokers, the practical consequence is the same either way: less capacity, more hesitation, and a client base that needs structure rather than optimism. Paul Katranis, founder, director and broker at SA Wealth in Adelaide, described the mood to Australian Broker in four words: “Consumer sentiment is pretty much destroyed right now.”

Lever one: the 40-year term, and the assumption buried inside it

AMP Bank launched its Equity Flex investment loan on 30 July. The headline features are a term of up to 40 years, an interest-only period of six to ten years with no reassessment during that term, a maximum LVR of 80 per cent, a minimum loan of $100,000, and offset and redraw. It is available through brokers, and at launch it was investor-only.

Sean O’Malley, group executive at AMP Bank, framed it around cash flow rather than capacity: “Property investing has always had a long-term focus, but the Budget changes and ongoing cost of living pressures have put an even greater premium on cashflow management.” On the origin of the product, he said: “Brokers wanted greater flexibility for eligible investors with strong equity positions who may be asset rich but increasingly conscious of cash flow.”

Read that framing carefully, because it is doing more work than it looks like it is. The detail that most coverage skipped is in the assessment: AMP assesses serviceability on a maximum 30-year loan on a principal and interest basis.

In other words, at AMP, the extra ten years does not lift the servicing calculation. The borrower gets a lower required repayment and better monthly cash flow. They do not get a bigger number at the top of the assessment because of the term.

That is a defensible and arguably conservative piece of product design. It is also the opposite of what a broker under time pressure is likely to assume when they see “40 years” on a rate sheet. If you take that product to a file that failed servicing by $180 a month and expect the term to fix it, you will be surprised — and you will have spent the client’s time.

The cost side deserves the same precision. AMP is not alone here: Australian Broker reported on 31 July that Pepper Money, RACQ Bank, G&C Mutual Bank, Great Southern Bank, MA Money and Australian Mutual Bank also offer 40-year terms, while none of the big four currently do. The same report put the additional cost of a 40-year term against a 30-year one at roughly $350,000 on a $650,000 purchase and roughly $400,000 at $800,000. Those are illustrative figures from one outlet rather than lender-published comparisons, but the order of magnitude is the point: this is the most expensive structural decision on the menu.

Richard Brown, principal and broker at Mortgage Choice, told the same publication: “For the right investors, it is absolutely a good introduction and a good offering.” That is the correct framing. Right investor, documented reason, eyes open on cost.

Lever two: interest-only with no reassessment

The six-to-ten year interest-only period without midterm reassessment is, in workflow terms, the more interesting half of the AMP product. It removes a re-approval event from the middle of the loan — the moment where a client whose circumstances have softened discovers that rolling their IO period is no longer automatic. Brokers who lived through the 2017–18 IO reset cycle will understand why that is worth something.

But note what it does and does not do. It improves cash flow and removes a future refinance trigger. It does not change how much the client owes relative to what they earn.

Lever three: the buffer, and the perimeter it sits inside

The third lever is the one that genuinely moves capacity. Australian Broker reported that specialist lenders are assessing on buffers of one to two percentage points above the actual loan rate, against the three percentage point buffer APRA expects of the banks it prudentially regulates.

That difference is structural, not promotional. APRA’s serviceability buffer expectation applies to authorised deposit-taking institutions. Non-bank lenders are not ADIs, so they are not inside that expectation — which is precisely why a non-bank assessment rate can be materially lower than a bank’s on the same file.

What does not change when you cross that line is the consumer credit framework. Where the lending is regulated consumer credit, responsible lending obligations under the National Consumer Credit Protection Act 2009 apply to the credit provider and to you as the broker regardless of whether the lender is an ADI. Moving a file to a lower-buffer lender moves it outside a prudential expectation. It does not move it outside your obligations, and it does not move it outside your best interests duty.

The constraint none of the three levers touch

Here is the part that reframes the whole exercise.

On 27 November 2025, APRA announced a debt-to-income limit that took effect on 1 February 2026. ADIs may fund no more than 20 per cent of new residential mortgage lending at a DTI of six times or above, applied separately to owner-occupier and investor lending. There are exemptions: loans for the purchase or construction of new dwellings, and owner-occupier bridging finance. APRA Chair John Lonsdale said at the time: “By activating a DTI limit now, APRA aims to pre-emptively contain risks building up from this type of lending and strengthen banking and household sector resilience.”

Now line the levers up against it.

A 40-year term does not reduce the debt or raise the income. An interest-only period does not reduce the debt or raise the income. A one-point buffer instead of three does not reduce the debt or raise the income. All three change the assessment. None of them changes the ratio.

So a file sitting at a DTI of 6.4 remains a file sitting at a DTI of 6.4 after every capacity trick on the market has been applied to it. If the reason it is struggling at an ADI is that the lender is managing its high-DTI bucket rather than that the client fails servicing, restructuring the term is solving the wrong problem.

Two things follow, and both are practical.

First, the DTI limit is a portfolio constraint on the lender, not a hard rule about the borrower. A DTI of 6.2 is not prohibited. It competes for space in a capped bucket, alongside every other high-DTI application that lender is looking at. That means placement, appetite and timing matter on these files in a way they did not before February — and it means the answer to a high-DTI investor file is often a different lender with room, not a different loan structure.

Second — and this is the convergence worth writing on a whiteboard — the DTI limit exempts loans for the purchase or construction of new dwellings, and the Budget measure exempts new builds from the negative gearing restriction. Two entirely separate policy instruments, drafted by two different bodies for two different reasons, both point investor lending in the same direction.

That is not advice to steer clients into new builds. New builds carry their own risks — valuation on completion, builder solvency, settlement timing, and depreciation assumptions that need to hold up. But when a client’s stated objective is to keep investing and the file is bumping against both constraints at once, the overlap is a fact about the market that belongs in your options discussion rather than as an afterthought.

What this means for your files and your file notes

ASIC’s guidance on the best interests duty in RG 273 puts the cost of the credit product near the centre of the assessment, and expects your records to show how you reached the recommendation you made. A 40-year term is, on the numbers above, the single most expensive structural choice available on an investor loan. That does not make it wrong. It does mean that a file where you recommended one should be able to answer, in 2029, the question of why.

The specific risk in this cycle is subtle. It is not brokers recommending bad products. It is brokers reaching for a capacity lever on the assumption it delivers capacity, when at least one of them — the term extension, at the lender that launched most visibly — is designed as a cash-flow tool and assessed as a 30-year loan. A file note that says “extended term to improve borrowing capacity” against a lender that assesses over 30 years is a note that does not match the product.

What to review this week

• Re-read the assessment basis, not the term. For every long-term product on your panel, confirm in writing how the lender assesses servicing. Term, IO period and assessment basis are three different fields and they do not move together.
• Separate your declined investor files into two buckets. Servicing shortfalls and DTI constraints need different answers. Structure fixes the first. Placement fixes the second.
• Check your grandfathering assumptions on existing clients. Anything held at 7:30pm on 12 May 2026, including contracts entered but unsettled, keeps its treatment. That is a proactive call worth making before the client reads a headline and panics.
• Write the cost comparison into the file, not just the conversation. Where a longer term is recommended, record the lifetime cost difference you presented and the client’s stated reason for accepting it.
• Ask your BDMs where their high-DTI bucket sits. Since February, that is a real question with a real answer, and it will change which lender you approach first.
• Recheck the buffer on every non-bank you use. If it is materially below three points, understand why, and make sure your suitability reasoning stands on its own rather than on the lender’s assessment rate.

The strategic read

Lender innovation after a policy shock is usually genuine and usually narrower than it first appears. What has been offered to brokers since May is real: more flexible terms, longer IO, sharper pricing, more responsive BDMs. It is worth using.

But the constraint that binds hardest on investor lending right now is a portfolio cap on high-DTI lending that took effect in February and that no loan structure can move. The brokers who do well out of the next twelve months will be the ones who diagnose which constraint they are actually facing before they choose a tool — and who can show, on the file, that they knew the difference.