Many mortgage prisoners still out there, say brokers
Mortgage brokers warn that a growing number of their clients are stuck in the so-called “mortgage prison” because they are unable to pass serviceability tests at alternative lenders, despite assurances from the prudential regulator that the rules don’t need to change to support competition.
National Australia Bank chief executive Ross McEwan sided with APRA, saying the current buffer was appropriate given not all the Reserve Bank’s 4 percentage points of increases have flown through to customers.
Australian homeowners are concerned about meeting repayments given persistent rate rises, says the MFAA. Paul Rovere
A survey of members conducted by the Mortgage & Finance Association found 80 per cent of brokers had an increase in customers unable to refinance from an existing loan because they cannot meet serviceability requirements at a new bank. Banks are required to test if borrowers can repay their loans at interest rates 3 percentage points higher than the market rate.
“There are many borrowers out there who have had no material change to their circumstances, who would get instant relief from a material reduction in the buffers,” MFAA chief executive Anja Pannek said. “This will positively impact competition as more borrowers are ‘unlocked’ from their mortgage prisons.”
But NAB’s Mr McEwan said at a lunch in Sydney: “There is always a lag as rate moves work their way through the economy. Should we be altering the interest rate margin, that 3 per cent buffer? At this stage, I don’t think so.
“I don’t think we are through it all [the rate rises], and we can adjust for individual customers anyway… I think prudence is still a good place for banking at the moment.”
Brokers are concerned that as lenders look at income and
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