APRA urged to relax refinancing rules to ease pressure on mortgage holders

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

Aussie battlers are bracing for the expiration of their fixed-term mortgages, with one expert warning buyers to avoid the big four banks. Picture: NCA Newswire

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.

An estimated $141bn fixed-rate home loans are tipped to expire later this year.

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.
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There are calls for APRA to remove the 2.5 per cent to 3 per cent buffer for dollar-for-dollar refinancing. Picture: NCA NewsWire / David Swift

“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.”
According to the latest PropTrack Home Price Index, national home prices continued to stabilise in April after rising for the fourth consecutive month, rising 0.14 per cent.
The cumulative increase in 2023 is now 0.75 per cent – driven by strong migration, tight rental markets and limited supply are offsetting the impact of rapid interest rate rises.

Australian home prices have risen for the fourth consecutive month, rising by 0.14 per cent.

Mr Gair said there are a number of solutions for borrowers coming off fixed-rate loans that are likely to see their repayments double.

In addition to consolidating debts and looking beyond the big four banks, he recommended getting the value of a property looked at if an owner believed its value was set to decrease.

“Banks assess the value of your home on current comparable sales. You don’t have to settle the day you return your paperwork – most lender evaluations last between 90-180 days so you can coincide it with your fixed-rate term ending. Doing this could be the difference between having enough equity to refinance.”

Experts say mortgage holders should get the value of their property re-evaluated if they believe it is likely to decrease.

Mortgage holders were also warned against submitting multiple applications at once, as doing so would affect their credit rating.

Mr Gair said people should be open to speaking with their bank and negotiate.

“Don’t pull the trigger and submit multiple applications at once. Banks can see that you’ve gone to two or three lenders and will consider this a red flag. A lower mortgage score will also make it harder to get approved.”

“Research the current interest rates available in the market and call your bank to negotiate a better deal in line with this. Banks are looking to hold onto customers for as long as possible, so the majority will give you a better rate for your loyalty.”

Originally published as APRA urged to relax refinancing rules to ease pressure on mortgage holders