Granite Launches 40-Year Loan and Softens Rate Rise Impact
Non-bank lender Granite will offer extended 40-year home loans from 6 October, with interest-only options and a softer rate pass-through for higher-LVR borrowers.
When the Reserve Bank lifted the cash rate to 4.6% on 29 September, borrowing capacity took another hit. For clients already at the limit of what the serviceability calculator will allow, the options narrow quickly — which is precisely why Granite's new product announcement is worth examining.
Australian Broker reports that Granite, the non-bank lending brand owned by ColCap Financial, will launch a 40-Year Extended Home Loan on 6 October. The product targets both owner-occupiers and investors who need more room to service their debt in the current environment. At the same time, Granite confirmed it would not pass the full 25 basis point rate rise on to most borrowers — a deliberate decision in a market where PropTrack has recorded home prices falling for a sixth consecutive month in September.
How the 40-Year Loan Works
The 40-Year Extended Home Loan is open to owner-occupiers aged up to 45 and to investors. It allows full 40-year terms with LVRs of up to 95% including risk fees, and construction loans are eligible.
The key serviceability feature is this: Granite calculates repayment capacity over a maximum of 35 years, not the full 40-year term. This extends a client's calculated borrowing power without changing the actual amortisation period. In a market where repeated rate rises have compressed what buyers can borrow, that stretch can make a meaningful difference.
Interest-only periods are available: up to five years for owner-occupiers and up to 10 years for investors. Michael Csavas, chief commercial officer at ColCap Financial, noted that the extended investor interest-only option may help clients manage their tax position following recent changes to property investor tax treatment — specifically the May 2026 federal Budget changes that limit negative gearing to new builds from 1 July 2027 and overhaul the capital gains tax discount.
Eligible PAYG borrowers, self-employed applicants, and borrowers using company or trust structures can also access an offset facility, redraw, and unlimited extra repayments.
Rate Pass-Through: Who Gets Relief
Alongside the new product, Granite announced a partial pass-through of the RBA's September rate rise. The structure is weighted towards higher-LVR borrowers — typically first-home buyers and recent purchasers who are feeling the most pressure from both higher rates and falling values.
For standard investment loans with an LVR of up to 80%, Granite is adding 0.05 percentage points. Standard owner-occupied home loans below 80% LVR will see 0.15 percentage points added. For borrowers above the 80% LVR threshold, rates will either remain unchanged or fall by as much as 0.65 percentage points, depending on borrower type, LVR band, and product.
That last point is significant. Higher-LVR borrowers are the cohort most exposed to valuation risk in a falling market. Holding or reducing their rate while passing more of the increase on to lower-LVR borrowers is an unusual structure, and one worth knowing about when comparing home loan options.
Granite is also raising its maximum loan size for self-managed superannuation fund borrowers from $3.5 million to $5 million, covering both commercial property loans and residential refinances. Only 5 basis points will be passed on to SMSF residential refinances, and all SMSF commercial rate movements will be smaller than the RBA's increase. It is worth noting that SMSFs can no longer buy new residential property under current borrowing rules, so the commercial property angle is the primary application here.
What This Means for Borrowers
A 40-year loan term carries a real cost: a longer amortisation period means more interest paid over the life of the loan. If a client takes a 40-year term when a 30-year loan would otherwise be feasible, the total interest bill will be substantially higher. Brokers considering this product should model both scenarios carefully and ensure clients understand the trade-off.
That said, in a market where serviceability assessments at 4.6% plus the regulatory buffer are disqualifying buyers who would otherwise be strong candidates, an extended term can be the difference between purchasing and being locked out. For first-home buyers approaching their borrowing ceiling, or investors managing cashflow after the budget changes tightened the investment property equation, the product fills a gap that does not currently exist in the major bank channel.
For the full details, see the original report in Australian Broker.