Because IO loans are the preserve of property investors whose aim.is to (highly) leverage to buy assets which they hope to sell for a future capital.gain
The way to leverage is to obtain an IO loan rather than PI as net cash outflow is lower allowing more servicibility of a larger loan
The Australian banks also threw in the old 90-100% lend on top of IO loans to these investors prior to the recent wholsale prostitution of Sidny an Merbourne to Asiatics.
Now that these same people has caused the boom in those 2 markets APPRA has (after the horse has bolted) sought to cool down the market and one of these measure is restrictin IO lending (and therefore refinancing.
So in effect loals are being penalised for the wholesale prostitution of Strayas property market to foreigners.
The fact that banks are still willing to lend IO to borrowers with 80% deposit is moot as most IO loans seeking refinance were at higher loan values of 90- 100% which were actively pushedby the banks to property investors
