A "mortgage prisoner" is someone who'd save money by refinancing but can't, because they don't meet a new lender's requirements. It's become more common as rates have risen, because lenders assess new applicants at a buffered rate, and higher rates mean bigger repayments to test.
If this sounds like you, you're not out of options.
Why it happens
When you apply with a new lender, they generally test whether you could afford repayments at about 3% above their actual rate. That's APRA's serviceability buffer.
On a $650,000 loan over 30 years:
- At an actual rate of 6.49%, the repayment is about $4,104 a month
- At the assessment rate of 9.49%, it's about $5,461 a month
You need to show your income can support the higher figure, after living expenses and other debts. Borrowers who took out loans when rates were lower, or whose income has dropped, can fall short.
Other reasons people get stuck:
- Property value has fallen and the LVR is now above 80%
- Credit issues since the original loan
- Changed employment, like moving to self-employment
Your options
1. Negotiate with your current lender
This is the most effective step. Your existing lender doesn't need to reassess you to cut your rate. Get a competing offer through a broker, even if you can't take it, and ask your lender to match.
2. Ask for a product switch
Many lenders have newer, cheaper products. Switching internally usually doesn't require a full reassessment.
3. Look for lenders with refinance-friendly policies
Some lenders apply a lower buffer or alternative assessment for borrowers refinancing like-for-like, with a good repayment history, and not increasing their loan. APRA has said lenders have flexibility to make exceptions to the buffer in some cases. A broker can identify which lenders are applying this.
4. Reduce other debts
Paying off a car loan or lowering credit card limits can tip the assessment in your favour. Every $1,000 of credit card limit counts against you even if the balance is zero.
5. Improve your income documentation
Overtime, bonuses or rental income not counted on your last application may now be eligible if you have the history.
6. Consider a specialist lender
Non-bank lenders sometimes have different assessment methods. Rates can be higher though, so compare carefully.
If repayments are becoming hard
Don't wait until you miss a payment. Lenders must consider hardship requests. Options can include a temporary repayment reduction, interest-only for a period, or extending your loan term. These cost more long term, but can get you through a tough patch. See struggling with mortgage repayments.
The National Debt Helpline (1800 007 007) offers free financial counselling.
Frequently asked questions
Does the serviceability buffer apply to my current lender?
Not if you're just asking for a lower rate. It applies when you apply for new or increased credit.
Will it get easier if rates fall?
Yes. Lower rates mean lower assessment rates, which makes passing serviceability easier. But there's no telling when that will happen.
Can a broker really help if banks have said no?
Often. We know which lenders have flexibility, and we can approach your current lender with a competing offer on your behalf.
Feel stuck with your current lender? Call Finfident on 0424 545 654. We'll look at every option, including getting your own bank to drop your rate.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.