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New escape route from ‘mortgage prison’ could soon be unlocked

Reviewed by expert, David Koch
4 min read
19 Mar 2024

The Reserve Bank’s decision to keep the cash rate on hold today won’t save the 1.6 million households at risk of mortgage stress.

But Compare the Market Economic Director David Koch is telling borrowers to hold on as a new escape route from ‘mortgage prison’ could soon be unlocked.

This comes as a growing number of borrowers are unable to pass serviceability tests, despite some banks offering specific refinance policies where servicing buffers are lowered from the traditional 3% to 1% if certain criteria are met.

“Banks generally stress test borrowers’ finances to ensure they can still afford the mortgage repayments if rates were to climb 3%, but since May 2022 the cash rate has surged by 4.25%,” Mr Koch explains.

“This is one of the reasons why we’re seeing so many people fall into mortgage stress and are unable to refinance.

“But if borrowers can hold on that bit longer, an anticipated 0.25% rate cut within the next 6 months could provide them some relief or offer them an escape route from mortgage prison”.

According to a Compare the Market analysis, a person with an owner-occupier $750,000 loan could be saving $121 a month if they were to go from a rate of 6.28% to 6.03%.

Mortgage sizeIf a 0.25% rate cut were to occur
Minimum monthly repayments on variable P&I rate of 6.03%Minimum monthly repayments on variable P&I rate of 6.28%Difference in monthly minimum repayments
Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.03% compared to 6.28% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees.

Mr Koch said there were several options people could consider when struggling with repayments.  

Try to negotiate a lower rate 

“Just one-in-three Aussie mortgage holders have tried to negotiate a lower rate this year, according to Compare the Market research,” Mr Koch said.

“Amazingly, 70% of those that called their lender said they were successful in securing a discount. It shows a simple phone call could end up saving you thousands. Don’t wait for the RBA to cut rates, do it yourself now by simply asking your lender.”

Ask for financial hardship assistance

“You should consider contacting your provider if you’re struggling to pay utility bills, energy bills, home or car insurance premiums – even if you’re in the middle of making a claim. There are hardship programs available for bills outside of your mortgage repayments.

“But if you’re still struggling to meet mortgage repayments, ask your lender for support. All lenders have hardship assistance options that they must consider you for if requested. This might include switching to interest only repayments, extending the loan term, fee relief, or rate concessions.

“If you’re concerned, talk to your lender about what support might be available to you.”

“Your lender wants you to talk to them if you’re in trouble so you both can work out a plan to cope. The last thing a lender wants is to shut down a client as it is expensive for them and complicated.”

Access free financial debt counselling

“If you feel overwhelmed by debt, don’t wait for it to snowball,” Mr Koch said. “Contacting a financial counsellor as early as possible could mean you can access more options.”

The free National Debt Helpline offers advice to people struggling with bills, fines, and repayments. They can help you develop a budget, and explore different options, and advocate on your behalf to other creditors. 

Contact the helpline on 1800 007 007. 

*Survey of 1003 people conducted in November 2022.


For more information, please contact:  

Natasha Innes | 0416 705 514 | [email protected]

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and personal finance products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.

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Written by Natasha Innes

Natasha Innes is a Media and Communications Advisor at Compare The Market. Natasha joins us after working as a journalist at the Courier Mail and Seven News. She graduated from Queensland University of Technology with a dual degree in Business and Journalism majoring in Public Relations.

[email protected]

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