Mr Mott said he initially suspected the survey sample had an error, but now believed a "more plausible" reason was that interest-only customers did not properly understand their loan. A third of Australian homeowners may be unaware of the risks associated with interest - only mortgages , with a lack of financial literacy possibly to blame , according to a survey by UBS . Interest - only loans offer banks an initial period when they pay off only the interest on the mortgage , but after that has elapsed , they must pay back the main mortgage as well , or refinance . Analyst Jonathan Mott said banks could face increases of between 30 % and 60 % at the end of interest - only periods , which could lead to " substantial stress " . In 2015 , the Australian Securities and Investments Commission questioned banks ' ethical standards in interest - only lending .
A third of Australian homeowners may be unaware of the risks associated with interest - only mortgages , with a lack of financial literacy possibly to blame , according to a survey by UBS . Interest - only loans offer banks an initial period when they pay off only the interest on the mortgage , but after that has elapsed , they must pay back the main mortgage as well , or refinance . Analyst Jonathan Mott said banks could face increases of between 30 % and 60 % at the end of interest - only periods , which could lead to " substantial stress " . In 2015 , the Australian Securities and Investments Commission questioned banks ' ethical standards in interest - only lending .