The April 2026 Borrower Snapshot
4 in 5 mortgage holders: neutral or negative about finances | 79% of brokers: serviceability rules blocking refinancing (up from 71.8% six months ago)
92% of brokers: helping clients who have never refinanced before | Cash rate: 4.10% — a hike to 4.35% in May would be the highest since the GFC
A new MFAA survey of mortgage brokers across Australia paints a grim picture of household finances in 2026: four in five mortgage holders are feeling either neutral or negative about their financial outlook. Inflation is still running above the RBA's 2–3% target band. The cash rate is at 4.10%, with another hike expected in May — a move that would take the rate to its highest level since the Global Financial Crisis. And the cruelest part? The majority of borrowers who want to refinance to a cheaper rate are being blocked by the very lending rules designed to protect them. Here is what the data shows, why the refinancing trap exists, and what options are actually available to you.
What the MFAA Survey Found
The Mortgage & Finance Association of Australia (MFAA) surveyed its broker members in February 2026 to track borrower sentiment, market conditions and behaviour across all states and territories. The headline finding: borrower confidence has weakened significantly across Australia.
Borrower Sentiment by State — MFAA Survey, February 2026
| State/Territory | Positive Sentiment | Key Driver |
|---|---|---|
| Queensland | 25.4% (highest) | Strong equity, healthy employment |
| NSW / ACT | Mixed | Wide gap between Sydney and regional areas |
| Victoria | 18.7% | Uncertainty about rates and employment |
| SA / NT | 14.8% (lowest) | Cost of living, housing supply concerns |
| WA | 28.2% negative | Affordability crisis: Perth median hit $1,012,000 |
Note on WA: despite Perth prices rising 16.9% year-on-year, the high negative sentiment reflects buyer frustration — surging prices mean larger required loans, tighter affordability, and fewer entry-level properties. Strong growth does not equal borrower confidence when people are priced out.
One positive finding: fewer borrowers are seeking hardship-related support, suggesting many households have adapted to higher rates over time. But adaptation is not the same as comfort — neutral sentiment still means stress without crisis.
MFAA CEO Anja Pannek noted how much economic conditions had changed since the last survey: "Borrowers across the country are experiencing very different conditions depending on where they live. We see strong optimism in some states, but there are supply constraints and affordability pressures in others, which will only be exacerbated by skyrocketing oil prices."
The Refinancing Trap
The most significant — and frustrating — finding in the survey is this: 92% of brokers are actively helping clients who have never refinanced before. But 79% say serviceability requirements are still preventing the same or more clients from switching lenders. That's up from 71.8% just six months ago.
What does this mean in practice? A borrower who took out a loan years ago at a lower rate may now be earning more, have a strong repayment history, and want to switch to a cheaper lender — but when the new lender stress-tests them, they don't pass. They're effectively locked in.
How the Serviceability Trap Works
When you apply to refinance, the new lender must assess whether you could afford repayments at your current loan rate plus APRA's 3% serviceability buffer. At today's standard variable rates of around 6.85%, that means being assessed at approximately 9.85% on the new loan.
Example: A borrower on a $700,000 loan who originally borrowed when rates were below 3% now needs to demonstrate they can service repayments as if the rate were nearly 10%. Many cannot pass that test — even if they have been making repayments comfortably for years at their actual rate.
The buffer was designed to protect against future rate rises — but it is now trapping people in loans that are no longer competitive.
What This Means for Sydney Borrowers
NSW recorded mixed sentiment in the MFAA survey — reflecting the significant gap between Sydney's high-cost market and more affordable regional areas. Sydney borrowers face a double pressure: higher loan balances (meaning each rate hike hurts more in dollar terms) and more difficulty refinancing due to those same larger balances requiring more serviceability headroom.
For a Sydney borrower on a $900,000 loan, the difference between a competitive rate and a loyalty rate 0.5% above market is roughly $270/month. Over a year, that's $3,240 sitting with your existing lender instead of in your pocket — even if the cash rate goes no higher from here.
What You Can Actually Do
- Check whether you actually qualify before assuming you're stuck. Some lenders apply the serviceability buffer differently, and a broker with access to 50+ lenders can find one where you do pass — even if your current bank says no.
- Ask about exception policies. Some lenders have retention or hardship refinancing pathways that apply different assessment criteria for borrowers with a strong repayment history.
- Try a rate negotiation first. Before refinancing, ask your current lender to match the market. Many will — particularly if you have a broker who can show them what you'll move to.
- Check your rate right now. If you haven't reviewed your rate in the last 12 months, there is a reasonable chance you are paying a loyalty premium. Even in a rising rate environment, the difference between lenders can be significant.
The Bottom Line
Australia's borrowers are under real financial pressure in 2026. The MFAA data confirms what most mortgage holders already feel: things are tight, confidence is low, and the people who want to do something about it — refinancing to a cheaper rate — are increasingly finding the door closed.
The serviceability buffer isn't going away soon. But the options are not zero. An experienced broker can assess your situation across multiple lenders, find the one most likely to approve you, and negotiate on your behalf — at no cost to you.
Written by Amit Narang, Mortgage Broker | Credit Representative 558902 of Outsource Financial Pty Ltd (ACL 384324)
Sources: realestate.com.au / Mortgage Choice, "Warning sign for housing market: Borrower confidence slumps as financial stress grows", Lisa Calautti, 7 April 2026; MFAA Market Sentiment Survey, February 2026 (via above).
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