Tens of thousands of Australians are trapped in "mortgage jails," and new lending standards prevent them from refinancing (refinance) for better interest rates.
The bank has revised its calculation of the cost of living, effectively reducing the amount of money it allows you to borrow.
Many people now find that they borrowed more money than banks can lend them under current conditions, which means they can`t "buy more than three." To get cheaper interest rates-no bank will lend them the amount they need.
In the past year, lending standards have been tightened. The Royal Commission on Financial Services is likely to tighten standards further, meaning people will be able to borrow fewer loans than before.
Property owners may have to pay high interest rates because they can`t sell them, which could cost them tens of thousands or even hundreds of thousands of yuan over the course of the loan.
Recently, Bank of Queensland and Auswide Bank announced that they would raise the floating rate on mortgages because of increased borrowing costs. Credit Suisse warned last month that banks were already considering cyclical interest rate increases.
The exact number of Australian mortgage prisoners is difficult to count, but Steve Jovcevski, an investment and loan expert at Mozo, told the news.com.au, that he expected most of the prisoners to be buyers of loans over the past five years.
For many recent borrowers, he said, there has been a dramatic change in the way lending qualifications are calculated, especially as banks begin to raise interest rates.
Before lending standards changed, banks adopted a uniform cost-of-living standard, which led many buyers to borrow more than they do today.
Jovcevski cited a couple with an annual income of one hundred and twenty thousand, who bought a house in 2013 with a total loan of eight hundred thousand yuan, an annual interest rate of 5 percent, a monthly contribution of 4295 yuan and a balance of 3680 yuan for monthly expenses.
Although their income has since increased to one hundred and twenty nine thousand yuan, they are now faced with a change in the cost-of-living calculation rules, which means banks have raised their demands on all borrowers.
Banks had previously estimated the spending, requiring borrowers to have 1.5 percent of their cushion against future interest rate hikes. Now they are watching people`s monthly spending more closely and raising the buffer to 2%.
According to the new standard, the couple can only borrow six hundred and eighty thousand yuan, although their income has not changed.
And because they still have more than six hundred and eighty thousand of their home loans, they can`t find other banks to earn low interest rates-which means they have to continue to pay high interest rates on their original loans.
The difference between a 5 percent mortgage rate and a 3.8 percent interest rate home loan totaled 149272 yuan during the loan period.
"when customers are basically tied to lenders, they are subject to any interest rate increases or conditions imposed by banks," Jovcevski said. Given the current situation, banks do have the ability to `imprison` some of their clients. "
"sadly, those who need concessionary mortgage rates to keep their finances healthy are precisely the ones most likely to be" prisoners "of mortgage loans."
Taj Singh, head of First Home Buyers Australia, said he was well aware of the impact of loan restrictions and new cost-of-living rules on borrowers.
This puts many borrowers in a position where they cannot refinance their loans to get lower interest rates, the mortgage broker said.
He said home buyers will continue to face the problem in recent years, given that many loans are rescheduled every four to six years.
But Brendan Coates, a research institute at the Gratham Institute, told news.com.au that the impact of any tightening of lending conditions would be largely limited to a small number of borrowers. Because rising house prices have given homeowners room to borrow after years on the market.
He predicted that the main impact was on those with down payments of less than 10 per cent. In recent years, the proportion has fallen from 14% in 2014 to 7% in 2018.
However, he did say that if house prices in Sydney and Melbourne continue to fall, the pain could spread to more borrowers.
