Uh yes. In fact many people have arguably taken out IO loans assuming they will be able to roll over the IO period multiple times (a useful strategy for investment, as people can have a cheap investment property then later sell at a profit, never having to pay the principal much or perhaps at all). Because of APRA's new regulations, there is now a 30% IO cap - and you can see in the article many banks are waaaay above this cap (especially Westpac). So not only will they likely have to stop offering IO loans to many people, they will almost certainly have to stop allowing people to extend them past thei initial term.

If you're an investor, probably negatively geared, and you previously assumed you'd be able to keep rolling over your IO period you could find yourself unexpectedly paying both principal and interest. Not only that, this could encourage investors unable to afford P&I to sell, which could bring down prices in an already oversupplied market. Those investors could potentially find themselves having to pay P&I AND unable to offload a property they assumed would make them money.

So - basically the crux of this whole issue is a lot of investors could find themselves paying P&I, and some may not be able to afford this. There's not a whole lot the banks can do, as they also have the added pressure of ScoMo's new bank levy (which is likely to result in banks raising mortgage rates).