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Feel stuck
with your mortgage?

A 2026 report found 36% of Australian borrowers feel trapped in their current home loan. Most of them still have more options than they think — and a broker's job is to find the ones that fit.

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The serviceability test

Why refinancing feels harder than it should.

Your actual rate

You pay

6.24%

your real rate

Bank tests you at

9.24%

rate + 3% buffer

Every lender must test a new application as if rates were 3 percentage points higher — even for a straight refinance of your existing loan. That's the gap that catches people out.

Illustrative only. Whether you'd actually pass this test depends on your income, expenses and existing debts — a broker checks the real numbers.

Why this is real

You can service your loan fine. That's not the test.

Here's the part that catches people out: refinancing isn't a formality where the new lender just confirms you've been paying on time. It's a brand new loan application, assessed fresh against today's rules — even if you've serviced a bigger loan, at a similar rate, for years without missing a payment.

APRA requires every lender to test new applications — including refinances — at your rate plus a 3 percentage point buffer, and has confirmed it's keeping that buffer in place. On top of that, from February 2026, APRA has restricted how much of a lender's new mortgage lending can go to borrowers with a debt-to-income ratio of 6 times or more, capped at 20% of new lending. Both settings make it harder to get approved today than when many people took out their original loan.

A 2026 Finder report found 36% of borrowers feel trapped this way — unable to refinance because of insufficient equity, or income and expenses that don't clear the test on paper, even though the loan itself isn't a problem. It's a genuine gap between "I can afford this" and "I can prove I can afford this to a new lender."

More options than it feels like

Being tested harder doesn't
mean there's no way through.

Four real angles, roughly in the order worth trying them.

try first

Ask your current lender

Renegotiating with the lender you're already with often involves a lighter-touch review than switching banks entirely — and ABS data shows this kind of internal refinancing has been growing faster than external switching through 2026.

policy varies

Different lenders, different rules

The 3% buffer is a floor, not a fixed number every lender applies the same way — some have introduced more flexible serviceability assessments for straightforward, like-for-like refinances. Which lender fits depends entirely on your numbers.

before you apply

Reduce what counts against you

Credit cards, personal loans and car loans all count against your serviceability, whether you use them or not. Clearing or reducing limits before applying can shift the outcome — this is also exactly what debt consolidation addresses.

the real fix

Let someone who knows the policies check

A broker knows which lenders are more likely to say yes to your specific situation before you apply — so you're not collecting rejections while your credit file takes the hit.

36%

of borrowers say they feel trapped in their current home loan

Finder 2026 Home Loan Report

$42.9B

was refinanced externally in a single quarter — a record

ABS Lending Indicators, March quarter 2026

+30.1%

year-on-year growth in internal refinancing — outpacing switching lenders

ABS Lending Indicators, March quarter 2026

Refinancing overall is at record highs — most borrowers who can switch, are. Feeling stuck is a real, documented experience for a meaningful minority, not the norm for everyone with a mortgage.

Worked example

Declined once, approved a month later — nothing about their income changed.

Picture a borrower who applies to refinance with a new bank for a lower rate and gets knocked back — their serviceability, tested at their new rate plus the 3% buffer, didn't clear the bar, even though they'd comfortably paid their existing, similar-sized loan for years.

Rather than stopping there, working with a broker surfaces two things: a $12,000 credit card limit they never used but which still counted fully against them, and a lender whose serviceability policy for like-for-like refinances is less punishing than the one that declined them. Closing the unused card and applying with the better-fit lender is enough to clear the test.

Nothing about their actual financial position changed in that month — only which lender they applied to, and what was counted against them.

This is an illustrative example, not a specific client. Every application is subject to individual circumstances, serviceability assessment and lender approval. This is general information within Australian Credit Licence scope and is not financial, tax or credit advice.

Keep readingRolling debts into your mortgage can also clear the serviceability test

Mortgage prisoner FAQs

Questions, answered.

What is a mortgage prisoner?

It's the term used for a borrower who can't refinance to a better deal — not because they can't afford their loan, but because they don't pass a new lender's serviceability test. A 2026 Finder report found 36% of Australian borrowers feel trapped this way.

Does the 3% serviceability buffer really apply to refinancing my own loan?

Yes. APRA requires every new home loan application — including a refinance of an existing loan — to be tested at the loan's interest rate plus a 3 percentage point buffer. APRA has confirmed it's keeping this buffer in place.

What changed with the new DTI rule in 2026?

From February 2026, APRA restricted lenders to no more than 20% of their new mortgage lending going to borrowers with a debt-to-income ratio of 6 times income or more. It's an additional constraint on top of the existing serviceability buffer.

If one bank declines my refinance, does that mean I can't refinance anywhere?

No. Lenders don't all apply serviceability the same way — some have more flexible policies for straightforward, like-for-like refinances. A decline from one lender doesn't mean the same application would fail everywhere.

Can asking my current lender for a better rate avoid this test?

Often, yes, at least partially. Renegotiating with your existing lender (internal refinancing) typically involves a lighter review than a full switch to a new bank — and ABS data shows this has been growing faster than external refinancing through 2026.

What can I do before applying to improve my chances?

Reducing or closing unused credit limits, paying down higher-interest debts, and getting a clear picture of your actual expenses all help, since lenders count your full financial position, not just your mortgage. A broker reviews this before you apply, not after a decline.

Find out where
you actually stand.

A licensed broker checks your real numbers against real lender policies — before you collect a decline on your file. No phone number, no obligation.

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Feel stuckwith your mortgage?