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A growing number of New Zealanders are becoming “mortgage prisoners”, as rising interest rates and house price falls mean they no longer meet the lending criteria to shift to a different bank.
Mortgage brokers estimate up to a quarter of borrowers could be in this position, and find themselves less able to shop around for a competitive rate, benefit from cash-back offers, or move from more expensive second-tier lenders’ rates.
Rod Schubert is the managing director of Rod Schubert Financial Advice (RSFA), and estimated 10% to 20% of his clients had no ability to refinance due to not meeting servicing requirements, meaning they ended up in what he called “mortgage purgatory”.
He said many borrowers might find themselves paying low-equity premiums for longer periods as well - a situation he called “low equity lockdown”.