2023 Lending Change: 'Mortgage Prisoners' Have Been Freed!

Send us Fan MailWe go through a big new improvement in the mortgage market and how it helps Aussies all across the country.Mortgage Prisoners stuck on their existing loan terms now have options!A major bank has announced a 1% buffer rate policy instead of the current 3% buffer. After 11 rate rises, the eligibility tests for refinancing got much harder in 2023. Borrowers with perfect repayment histories had to prove they could absorb another 3 percentage point increase in interest rates. That is an unrealistic benchmark for someone simply seeking to swap their existing bank. This benchmark issue meant hundreds of thousands of borrowers were stuck with their existing providers. Now, borrowers with good repayment histories only need to prove they can continue to meet repayments with a 1% increase from here.This helps improve competition, by providing options.Some banks have been using their data to work out who's trapped and offer them lower discounts as a result of their poor bargaining position. That practice is under threat now, with more and more of these borrowers now having more options to refinance.Hence it is a big win for Aussie borrowers, and not so good for some banks. To put it into perspective, reducing the buffer rate by a full 2 percentage points (from 3 to 1) is equivalent to:> Rewinding the clock to July 2022, winding back ~8 of the 11 rate rises.>Improving borrowing power by over 20-25%> If you could borrow the money from before, you're likely to be able to borrow the money again. The new assessment hurdles are a bit higher than this time last year, but not dramatically. Most borrowers have not borrowed to their maximums either.Reach out to us at www.australianpropertytalk.com.au