You could already be in mortgage prison, and it’s not your fault
Key takeaways
- New data from Finder's 2026 Home Loan Report finds that many Australian borrowers are unable to switch their home loans to better deals.
- As many as 36% are trapped in mortgage prison because they lack the equity to refinance, or because their income is too low and their expenses are too high.
- What's next: Borrowers can improve their chances of refinancing by getting their homes valued and redoing their household budget.
Rising interest rates and a high cost of living have left many Australian borrowers in mortgage prison: they can't switch to a better home loan because they probably won't qualify.
That's according to data from Finder's 2026 Home Loan Report.
While 45% of borrowers surveyed in the report say they can switch home loans right now:
- 22% say they can't switch because their income is too low or their expenses are too high.
- 14% say they don't have enough equity in their homes to switch.
- 9% say they don't know how to switch home loans.
- A further 13% can't switch because they're on fixed rate home loans.
Mortgage prison puts borrowers at a big disadvantage. Switching home loans (the technical term is refinancing) is one of the best ways to get a better deal.
By refinancing, borrowers can get access to lower interest rates, offset accounts and even borrow some of their home equity.
But borrowers in mortgage prison are in a worse position now than when they successfully applied for their current home loan. Until their circumstances improve, they're trapped.
Why are so many borrowers trapped?
Current economic conditions are really a perfect storm for mortgage prison. Australian borrowers today face a combination of high interest rates and a long period of higher inflation.
This means while everything in life is more expensive, home loan repayments have become more expensive too.
This leaves many borrowers with less money than they may have had when they applied for their home loan originally, making it harder to get a new loan approved today.
This is the leading cause of mortgage prison according to Finder's report, with 22% of borrowers citing lower income and higher expenses.
Not enough equity
Falling house prices make mortgage prison even more likely. The last couple of months have seen sustained declines in property prices across most Australian markets.
It's much harder to get a new home loan approved if your property hasn't grown much in value. You have less equity.
That's the situation for 14% of the borrowers Finder surveyed.
Get more home loan insights
Read the 2026 Finder Home Loan Report now
5 tips for borrowers to get out of mortgage prison
Borrowers don't have to accept their current circumstances. There are steps every Australian borrower can take to loosen the bars of their mortgage cell, or get out of jail completely.
- Redo your budget. While it's an obvious step, it's very important to regularly review your monthly spending and see where your money is going. You might be surprised at the big costs you're not thinking about. This is especially true when the cost of living is on the rise and prices are constantly creeping upward.
- Cut back your spending. Once you've identified areas where you can cut back, it's time to put them into practice. If you are going to apply for a new home loan, lenders typically look at the last three months of your spending (up to six months in some cases). So three months of cost cutting could be enough to get your application over the line.
- Switch and save. Switching to cheaper products or services is a great way to unlock big savings. Take another look at your electricity and gas plans, your internet and phone plans, and shop around for better deals on your car and home insurance.
- Get your property valued. The best way to judge your equity is to get a professional valuer or real estate agent to inspect your property and provide a valuation. This gives you a better idea of your home's current value than simply comparing recent local property sales.
- Talk to a mortgage broker. If you're struggling to get a home loan approved, then a mortgage professional whose whole job is getting applications across the line is a good person to talk to.
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