More Aussies are becoming ‘mortgage prisoners’ as those declined for refinance approvals surge

Australians are at risk of becoming ‘mortgage prisoners’ as they are becoming stuck with their current loans and unable to refinance them.

Many Australians are being advised to switch banks or look for a better deal on home loans to avoid interest rate rises.

But founding principal of Digital Finance Analytics (DFA), Martin North, has said that 40 per cent of people who have tried to refinance their loans have been unsuccessful.

Just a year ago, only 5 per cent of people were unable to do so, news.com.au reported.

Australians are at risk of becoming ‘mortgage prisoners’, as they are becoming stuck in their mortgage and won’t be able to refinance their loans (stock image)

Data from DFA and investment bank UBS has found the sudden increase in the number of failed mortgage refinancing applications.

This is happening because the bar has become a lot higher to get a home loan, and while applicants may have cleared the bar the first time, it may not happen again.

This follows years of banking reform and the fallout from the banking royal commission.

Now, those same people don’t qualify for the same mortgage that they once did.  

Mr North said that the majority of people applying for refinances were doing it in an attempt to get their monthly repayment down.

‘They are struggling with bills and everything else,’ he said. 

Homeowners are under further stress as there could be a fall in property values quite soon.

Mr North has calculated that there are now close to one million Australians close to mortgage stress.

Data from DFA and investment bank UBS has found the sudden increase in the number of failed mortgage refinancing applications

Data from DFA and investment bank UBS has found the sudden increase in the number of failed mortgage refinancing applications

DFA has defined ‘mortgage stress’ as being people who go further into debt or pick at their savings because their expenses are greater than their income.

‘And then they’re stuck, because suddenly they find that that wonderfully alluring low rate that’s being hung out to them is inaccessible,’ Mr North said. 

He calls them ‘mortgage prisoners’ because they go home empty-handed, trapped in a financial squeeze.

Although it’s stressful for some, not everyone will have issues refinancing.

Those considered low risk and have a good track record with their costs under control will probably be able to get a better deal.

Read more at DailyMail.co.uk