Overview of Great Southern Bank’s 40-Year Mortgage Launch
On September 9, 2025, Great Southern Bank (GSB), one of Australia’s largest customer-owned banks, announced the introduction of variable-rate home loans with terms of up to 40 years, specifically targeting first home buyers (FHBs). This move aims to address the ongoing housing affordability crisis by reducing monthly repayments, allowing younger Australians to enter the property market sooner. GSB, which manages over $17.4 billion in home loans, positions this as a “starter home loan” to help borrowers get their foot in the door, with the expectation that most won’t carry the loan for the full term but will refinance or pay it off earlier. The product is part of a growing but controversial trend among smaller lenders, following Pepper Money’s launch of Australia’s first official 40-year loan in December 2024.
This initiative comes amid record-low housing affordability, with dwelling prices rising and first-time buyers facing barriers like high interest rates and limited supply. GSB’s chief customer officer, Rolf Stromsoe, stated that lower repayments could make the difference between renting and buying, particularly for those starting their homeownership journey.
Key Features of the 40-Year Mortgage Product
The loan is designed for owner-occupiers and includes flexibility to encourage faster repayment. Here’s a breakdown:
| Feature | Details |
|---|---|
| Eligibility | Australian citizens or permanent residents aged 18–40; first home buyers only; for purchasing new/existing homes, building a new home, or refinancing (including land loans). |
| Loan Type | Variable-rate principal and interest (P&I) repayments; maximum loan-to-value ratio (LVR) of 90% (including fees). |
| Repayment Flexibility | Fee-free extra repayments; offset account option to reduce interest faster; no expectation of full 40-year term—most borrowers anticipated to refinance within years. |
| Availability | Offered through GSB branches, brokers, or online; aligns with broader home loan options like those for investors or refinancers, but this is FHB-specific. |
| Interest Rates | Not explicitly detailed in announcements, but GSB’s standard variable rates apply (typically competitive for customer-owned banks); borrowers should check current rates on the bank’s site. |
GSB emphasizes that while monthly costs drop, total interest paid over 40 years could be significantly higher—potentially tens or hundreds of thousands more—urging borrowers to use the product as a short-term strategy.
Benefits for First Home Buyers
- Increased Borrowing Power: A longer term spreads repayments, boosting affordability. For example, a single borrower earning ~$80,000 after tax could gain nearly $60,000 more in borrowing capacity compared to a standard 25-year loan.
- Market Entry: Helps FHBs buy sooner in a rising market; one broker example cited refinancing a 40-year loan to 30 years after nine months, with the property appreciating $150,000.
- Research Support: A GSB-commissioned survey showed strong interest among younger buyers, with 30% of Australians open to 40-year terms for lower monthly payments.
- Alignment with Policies: Complements government initiatives like the expanded Home Guarantee Scheme, which supports FHBs with low deposits.
In 2024–2025, GSB supported nearly a third of its new lending to FHBs, including $1.24 billion in additional loans and key workers via the Home Guarantee Scheme.
Potential Risks and Criticisms
While marketed as a lifeline, the product has sparked debate:
- Higher Lifetime Costs: Lower monthly payments come at the expense of more interest over time. Finder’s Graham Cooke noted it could cost “a lot more” overall.
- Negative Equity Risk: If property values fall, borrowers could be “mortgage trapped” (owing more than the home’s worth), complicating refinancing or sales.
- Controversy: Critics, including the Housing Industry Association’s Tim Fowler, argue it benefits banks more than buyers by extending debt. It’s seen as a short-term fix rather than addressing root causes like supply shortages.
- Limited Adoption: Few lenders offer it (e.g., Pepper Money, RACQ Bank, G&C Mutual Bank, Credit Union SA), and it’s often FHB-only to mitigate risks.
Brokers like Emerald Rowlands-Sierra from Mortgage Success welcome it for desperate FHBs but advise caution.
Market Context and Social Media Buzz
Australia’s housing crisis has pushed innovation, with FHBs comprising a growing share of loans despite challenges. GSB’s launch follows similar products from non-majors, as major banks stick to 30-year max terms. On X (formerly Twitter), discussions as of September 14, 2025, are nascent and mostly news shares, with low engagement (e.g., posts from @YahooFinanceAU and @TheAdviserAU garnering under 60 views). Brokers like @aussieloansdrct have amplified articles, questioning if it’s a “smart move.” No major backlash or viral debates yet, but sentiment leans toward cautious optimism for affordability.
For personalized advice, consult a broker or GSB directly, as eligibility and rates vary. Check the bank’s website for applications. If you’d like a sample repayment calculation, more on competitors, or X sentiment analysis, let me know!