Thousands of Aussies trapped in mortgage prison

NSW households struggling the most, new data shows

Thousands of Aussies trapped in mortgage prison


By Mina Martin

The number of people at risk of becoming mortgage prisoners in Australia has jumped by 42% since the Reserve Bank started lifting the cash rate, with NSW households struggling the most.

This was according to new data from personal finance marketplace and advice company Compare Club. The data  was released ahead of the Reserve Bank’s March cash rate meeting, where the board is expected to hike for the 10th consecutive time.

Compare Club’s data, based on 6,725 home loan refinancing enquiries, showed that the percentage of Australians with an LVR of 91% or more has increased from 14% in April 2022 to 20% in Feb 2023, which according to ABS data meant, there’s now around 700,000 mortgage prisoners.

Across states, NSW has the biggest number of mortgage prisoners between Nov. 1 and February, at 19%, with Victoria not far behind, with 18%. In contrast, only 11% of South Australian refinancing enquiries have an LVR of 91% or higher. See the table below.


Percentage of refinance enquiries with 91% LVR (February - April 2022)

Percentage of refinance enquiries with 91% LVR

(Nov 2022 - February 2023)

















“The risk with highly leveraged loans in a falling property market, is that an Australian’s property’s value can fall below their loan amount, placing them in negative equity,” said Lance Goodman (pictured above), Compare Club CEO.

“Our data shows that the impact of the RBA’s consecutive cash rate hikes combined with a downturn in the property market has really started to kick in for households who, less than 12 months ago, could comfortably service their mortgage,” Goodman said. “Borrowers in a negative equity situation are prisoners of circumstance. Refinancing will be difficult unless a new bank values their home more highly than their current one or they have enough savings to pour back into their loan and reduce the capital amount. It’s particularly galling for these homeowners as they can see better rates and cashback offers from other lenders getting further out of reach.

“We’ve also just seen the regulator opt to keep the serviceability buffer at 3%, but many people who are rolling off cheap mortgages this year will have been assessed at their ability to pay at around 5%, when the reality is a lot of homeowners will be facing a rate of 6% or higher, which is far in excess of what their lender originally thought they could pay,” he said.

An estimated 800,000 homeowners are expected to roll off ultra-low fixed rates this year, with many of them likely to be at risk of getting locked into mortgage prison, Goodman said.

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