After the last property boom five years ago, a drop in the market left some buyers facing “mortgage prison”, and experts warn this risk could rear its head again.
Falling property prices could affect a homeowner’s ability to refinance to a lower mortgage rate.
“However, what goes up must come down … and people who bought last year, particularly in the second half, or earlier this year, may find their equity drop significantly.” If property prices were to fall more than 20 per cent in Melbourne and Sydney by the end of 2023, as forecast by NAB, those who purchased median-priced houses with a 5 or 10 per cent deposit in December last year would find themselves in negative equity when their fixed term ended, RateCity modelling shows.
Shore Financial senior credit adviser Derek Farmer already has “a good chunk” of Sydney clients who would like to refinance to a lower rate, but can’t meet the higher serviceability requirements introduced by the banks late last year.
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