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Essentially correct. When assessing serviceability lenders look at money coming in and how much is going out. A 25 year P&I amortization schedule has a higher outgoing than a 30 year P&I amortization schedule, thus an I/O loan costs more in cash-flow to the lenders thinking and as a result it...

Most lenders credit assessment for interest only loans actually has a higher bar than a P&I loan. The default behavior for an I/O loan is 5 years I/O then 25 years P&I. Most lenders assess these loans as 25 years P&I rather than 30 year P&I for a regular loan. I guess the RBA can make all...