The hike in interest rates has lowered the property prices in Australia, but the homeowners could find themselves being locked into mortgage prisons.
The increased rates have driven the property prices down, while the experts believe that increase in rates could lower the prices by 20 per cent over the next 18 months.
The property prices will continue to go down as the months progress, seemingly the interest rates will continue to rise, as the recent RBA meeting suggests more hikes in the coming months.
New homeowners, who recently bought the property, could see the consequences as the fall in price could impact the equity they have in their properties.
Meaning, bringing it down to 20 per cent and making it costly or impossible to refinance their loans.
Some experts believe that declining property prices could impact the borrowers as they would not be able to refinance their loans and as a result, they would stick in “mortgage finance”.
RateCity.com.au research director Sally Tindall said the families who had not got a decent pay hike in the last couple of years could see the problems as they would find they no longer met the banks’ stricter serviceability tests.
“Borrowers who own less than 20 per cent of their property value when their fixed rate ends could find they’re forced into negotiating solely with their current lender, or risk having to pay lenders’ mortgage insurance,” Ms. Tindall said.