Rising interest rates have produced a new, less desirable type of mortgage holder – the mortgage prisoner. Having limited options available to ease their financial burden, these mortgage holders have recently been under perhaps the greatest level of mortgage stress, but we may now potentially hold the key to unlock their prison and alleviate their financial pain.

What is a Mortgage Prisoner?

The term “mortgage prisoner’ describes mortgage holders who are locked into a home loan that is higher than the market average and are potentially subject to mortgage stress as a result.  They often find themselves in this position due to lending assessment policies of their own or other lenders with whom they were hoping to switch to a more affordable product. It can also be a result of moving into a higher variable rate loan after a fixed term expiry and being unable to refinance to a cheaper rate.

As more and more mortgage holders are experiencing this financial imprisonment of late, lenders are beginning to realise that they could potentially offer practical solutions to help these customers by thinking outside the box.

Who could qualify for these new lender policies?

Customers that have found themselves locked in a mortgage prison, may be able to refinance to a lower rate with certain lenders if they meet the following requirements:

• A new or existing customer
• No significant change in income in past 12 months such as a role or industry change, starting a new job or reduction in income.
• 12 months good conduct on their home loan and other liabilities
• No increase in the level of liabilities in the last 12 months.
• Current income and expenses including current loans are disclosed and verified.
• No change in remaining loan term
• The refinance is dollar for dollar.
• The loan does not require mortgage insurance.
• The repayments will be lower than what the customer is currently paying

Concessions Made to Serviceability.

If a customer has maintained good conduct on their current commitments and will clearly stand to benefit from a reduced interest rate, their capacity to pay the new loan will be assessed not on the standard 3% buffer rate above the new rate but only at 1%. This will also give the mortgage holder an increase in their capacity to borrow and therefore qualify for a new lower rate.

If you or someone you know, has been struggling with managing an expensive mortgage product yet unable to do anything about it, then this new policy may be the answer. For more details and to find out which lenders offer mortgage prisoner relief, speak to one of the Blackburne Mortgage Broking team and take a step towards financial freedom.