Bank communication clear about end of interest-only period

Lending restrictions,
In 2017, Buck took out several loans with the bank and agreed to five years of interest-only payments on each of the loans. Buck would periodically contact the bank to refix the interest rates for each of his loans, and the bank would then send out a letter confirming the changes to his lending and setting out the details of his repayments, including the end of the interest-only period and/or the beginning of principal and interest payments. Buck spoke to the bank in late 2021 about refixing the interest rates for several of his loans. Buck came out of this correspondence with the bank considering he was extending his interest-only period when he refixed the interest rates.
June 2023

Buck’s interest-only period on several of his loans expired in early 2022. The bank provided written notice of this expiry 14 days ahead of time. Buck then called the bank to discuss and the bank explained that the initial five-year period of interest only-payments had expired, and that Buck would have to complete an affordability assessment if he wanted a further interest-only period to ensure the lending could still be paid off in full by the end of the original term of the loan.

Buck complained to our office that the bank did not advise him that his interest-only period was ending and misled him to believe that his interest-only period had been extended when he contacted it to refix the interest rates on several of his loans in late 2021.

Our investigation

We reviewed the documentation between Buck and the bank when the interest-only period was agreed to in 2017 and found it was clear it was for a five-year term. Furthermore, each time Buck refixed the interest rate for each of his loans, the bank sent him a letter summarising the changes to his repayments and in each of these letters included information outlining the end of the interest-only period and/or the beginning of principal and interest payments. We found that the bank had not breached its duty to communicate clearly and effectively in these letters. However, we did recommend that the bank review its standard letters summarising home loan changes to specifically and consistently refer to "final interest-only payment".

We also reviewed Buck’s calls to the bank in late 2021 to refix the interest rates on some of his loans. We found nothing to suggest the bank misled Buck that his interest-only period had, in fact, been extended beyond the expiry date.

Finally, we explained to Buck that the bank was entitled to decline a further interest-only period because Buck had failed to satisfy the bank that the remaining lending would meet its affordability criteria. We noted the bank is entitled to set its own lending criteria, and it is a matter of commercial judgement for the bank.


We did not uphold Buck’s complaint.

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