Private Lending Interest Rates Australia 2025: What to Expect
Current private lending interest rates in Australia for 2025. Compare first and second mortgage rates, fees, and factors that affect your rate.
Private Lending Interest Rates Overview
Private lending rates in Australia are higher than bank rates, reflecting the speed, flexibility, and accessibility these loans provide. Understanding current rates helps you evaluate whether private lending makes financial sense for your situation.
Current Private Lending Rates (2025)
First Mortgage Rates
| Loan Type | Rate Range | Typical LVR |
|---|---|---|
| Residential (metro) | 9% - 12% p.a. | Up to 75% |
| Residential (regional) | 10% - 14% p.a. | Up to 70% |
| Commercial | 10% - 14% p.a. | Up to 65% |
| Development/Construction | 11% - 16% p.a. | Up to 70% |
| Rural/Land | 12% - 16% p.a. | Up to 60% |
Second Mortgage Rates
| Loan Type | Rate Range | Typical LVR |
|---|---|---|
| Residential | 14% - 18% p.a. | Up to 80% combined |
| Commercial | 15% - 20% p.a. | Up to 75% combined |
Second mortgages carry higher rates due to increased risk—the second mortgagee only gets paid after the first mortgage is satisfied.
Fee Structures
Beyond interest rates, private loans typically include:
Establishment Fees
- Range: 1% to 3% of loan amount
- Example: $15,000 to $45,000 on a $1.5M loan
- Some lenders charge flat fees instead (e.g., $5,000 to $10,000)
Valuation Fees
- Residential: $300 to $600
- Commercial: $800 to $2,500
- Development sites: $1,500 to $5,000
Legal Fees
- Simple transactions: $1,500 to $2,500
- Complex deals: $3,000 to $5,000
Exit Fees
- Most private lenders charge no exit fees
- Some charge 1-2% if repaid within first 3 months
Factors That Affect Your Rate
1. Loan-to-Value Ratio (LVR)
Lower LVR = Lower risk = Better rate
| LVR | Rate Impact |
|---|---|
| Under 50% | Best rates available |
| 50% - 65% | Standard rates |
| 65% - 75% | Higher rates |
| Over 75% | Premium rates or decline |
2. Property Type and Location
Lower rates for:
- Metropolitan residential properties
- Established suburbs with strong sales history
- Standard construction, good condition
Higher rates for:
- Regional or remote locations
- Unusual property types
- Vacant land
- Properties requiring significant work
3. Loan Purpose
Lower rates:
- Bridging finance with clear exit
- Debt consolidation with equity
- Business purpose with trading history
Higher rates:
- Construction/development (staged risk)
- Speculative purchases
- Unclear exit strategy
4. Borrower Profile
While private lenders focus on security, your profile still matters:
- Credit history: Clean history may get 0.5-1% better rates
- Experience: Repeat borrowers often negotiate better terms
- Exit strength: Verified sale contracts or refinance approval improve rates
5. Loan Term
Most private loans are 3 to 24 months. Very short terms (under 6 months) may attract slightly higher annualised rates due to fixed costs spread over less time.
How Private Rates Compare to Banks
Bank Rates (January 2025)
- Owner-occupied: 6.0% - 7.0% p.a.
- Investment: 6.5% - 7.5% p.a.
- Commercial: 7.0% - 9.0% p.a.
The Premium Explained
Private lenders charge 3-8% more than banks because they:
- Accept higher risk borrowers banks reject
- Process faster (days vs weeks)
- Require less documentation
- Offer flexible terms and structures
- Lend on non-standard properties
- Have smaller loan books with higher operating costs per dollar lent
Real Cost Calculations
Scenario 1: Short-Term Bridge
Loan: $500,000 for 4 months
Rate: 11% p.a.
Establishment fee: 1.5%
- Interest: $500,000 × 11% × (4/12) = $18,333
- Fees: $500,000 × 1.5% = $7,500
- Total cost: $25,833
Scenario 2: 12-Month Business Loan
Loan: $800,000 for 12 months
Rate: 12% p.a.
Establishment fee: 2%
- Interest: $800,000 × 12% = $96,000
- Fees: $800,000 × 2% = $16,000
- Total cost: $112,000
Scenario 3: Development Finance
Loan: $2,000,000 drawn progressively over 18 months
Rate: 14% p.a.
Average drawn balance: $1,200,000
Establishment fee: 2%
- Interest: $1,200,000 × 14% × 1.5 = $252,000
- Fees: $2,000,000 × 2% = $40,000
- Total cost: $292,000
How to Get the Best Rate
1. Improve Your LVR
If possible, offer additional security or reduce the loan amount to hit a lower LVR band.
2. Prepare a Strong Exit Strategy
A confirmed property sale contract or bank pre-approval strengthens your application and can reduce rates.
3. Compare Multiple Lenders
Private lending rates vary significantly. Getting 3-5 quotes often reveals 1-2% rate differences.
4. Negotiate Fees
Establishment fees are often negotiable, especially for larger loans or repeat borrowers.
5. Consider Timing
If you can wait even 2-3 weeks, you may qualify for a non-bank lender at lower rates than urgent private funding.
Rate Trends and Outlook
Historical Context
Private lending rates have remained relatively stable even as bank rates fluctuated:
- 2020-2021: Rates compressed slightly due to competition
- 2022-2023: Rates increased 1-2% following RBA hikes
- 2024-2025: Rates stabilising as RBA pauses
What's Next
As interest rates potentially ease in 2025, expect:
- Slight downward pressure on private rates
- More competition from non-bank lenders
- Continued accessibility focus (speed and flexibility valued over rate)
Frequently Asked Questions
Are private lending rates negotiable?
Yes. Establishment fees especially are negotiable. Interest rates have less room but strong deals (low LVR, clear exit) can secure better terms.
Why is my quoted rate higher than advertised?
Advertised rates are typically best-case scenarios. Regional properties, higher LVRs, second mortgages, or perceived exit risk increase rates.
Can I get rate reductions for larger loans?
Sometimes. Larger loans spread fixed costs further, and lenders may reduce fees or rates for loans over $1M.
Do rates differ between states?
Slightly. Properties in Sydney and Melbourne typically get marginally better rates due to higher liquidity. Regional SA, WA, and Tasmania may attract 1-2% premiums.
Is the rate fixed or variable?
Most private loans have fixed rates for the loan term, providing certainty on costs.
Conclusion
Private lending rates in Australia range from 9% to 18%+ depending on loan type, security, and borrower circumstances. While higher than bank rates, the speed, flexibility, and accessibility justify the premium for many borrowers.
The key is understanding total costs—not just the interest rate—and comparing multiple offers to find the best deal.
Introducr lets you receive competitive offers from multiple verified private lenders, making rate comparison simple. Post your funding request and see what rates you actually qualify for.
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