The big call I make to clients and potential clients is to review your mortgage at least every two years and if worthwhile change lenders. but for a whole new group of Mortgage holders, this simply is not possible – they are Mortgage Prisoners. A mortgage prisoner is someone who cannot find an alternative to their current mortgage because they will not satisfy the new lending guidelines. Not that long ago it was only 5% of mortgage holders that were in this situation – now it is estimated to be around 40%.
While there are some banks advertising low interest rates to attract new customers, it is not that easy to get these loans because of the more restrictive lending standards that have limited how much people can borrow. The bottom line is that the standards were most likely too loose for too long and now pressure has been brought to bear for lenders to tighten such controls. The downside is that there are many people who have a current mortgage that are effectively locked into a higher rate.
Homeowners also are faced with the issue of falling house prices and the prospect of rising interest rates thereby increasing their repayments as well as reducing their equity in their property which has a further knock-on in making the prospect of refinancing more difficult.
The more extreme issue here is if people start to have negative equity in their homes which would place further stress on Australian households. People being unable to refinance also denies them the access to consolidate loans and reduce their overall household cost by undertaking such activities as consolidating credit card debt.
With all my clients now – the main emphasis and attention are certainly on their household expenses and how that will translate into the prospect of submitting a successful loan application. I have also heard of cases where people were getting loans that included a clause that they had to reduce their expenditure. This is concerning indeed.
But not everyone will have trouble refinancing, I find that customers that are considered low risk with a good track record in relation to their income and who have their costs under control, can still get a better deal. I find the best deals are available for customers that have traceable living expenses via bank statements and credit card statements.
As I have said before – only 45% of Australians have reviewed their mortgage in the last 4 years – quite often leaving substantial funds in the banks pocket rather than the customers – food for thought. As always please reach out to find out more.
