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Rule change that would get battlers out of mortgage prison

Updated: May 30

A significant amount of fixed-rate home loans are tipped to expire in the coming months, leaving many with insufficient equity on their property.

A mortgage expert has warned that the impending expiration in fixed-rate home loans would leave many Aussie homeowners locked into a mortgage prison. Over the next few months, an estimated $141bn in fixed-rate home loans are expected to expire – meaning homeowners with insufficient equity in their property will greatly suffer. Advocates like Ryan Gair are calling for APRA to ease the rules for borrowers looking for dollar-for-dollar refinancing by removing the 2.5 – 3 per cent buffer.

Rate Money’s CEO said that the loan serviceability buffer should be removed to allow borrowers to save on their loan in order to avoid defaults on their mortgage. “Home loan buffers made sense during the last few years when we had record-low interest rates. They acted as a contingency for lenders to ensure borrowers could repay their loan. “However, it’s now become an unfair trap for those looking to refinance the exact same amount – dollar-for-dollar – with a new lender and they’re left paying hundreds or thousands more on the same loan.

“APRA should have separate recommendations to regulate existing borrowers: they should allow those looking to refinance to simply show that they can meet the repayments along the same lines as applying for a new loan, and that your current income can still service the repayments.”

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