Oceania: New study reveals the rise of home loan hostages

Three quarters of Australian borrowers are now at risk of becoming home loan hostages due to their lifestyle and financial decisions, new research from mozo.com.au has found.

“Home loan customers might be unaware that when they go to refinance their home loan with a new lender, they are assessed as though they are a new borrower, taking into account their financial standing beyond their history of meeting repayments and their LVR,” said Kylie Moss (pictured above), Mozo director.

The research revealed that many borrowers are planning to make big life decisions that could see them become hostages to their home loan, with 19% planning to change jobs, 8% having a child, and 18% taking out a new credit card, personal loan, or car loan.

“The key difference between a home loan hostage and mortgage prisoner is that a hostage may temporarily find it difficult to refinance,” Moss said. “While a prisoner is someone who is facing extreme financial hardship and is unable to refinance their mortgage and may have to default on their repayments, apply for financial hardship, or sell their property.”

Other financial and lifestyle changes that borrowers are anticipating over the next 12 months that may also impact their ability to refinance include not making regular savings (23%), household income reducing (13%), and significantly increasing their spending (12%).

“Cost of living pressures and rising interest rates have seen many Aussies struggling to adjust their cash flow,” Moss said. “Unfortunately, this could mean borrowers who look to refinancing for financial relief could be knocked back.”

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