It’s being described as a “mortgage mirage”. It’s an offer from the bank that looks too good to be true and, as it turns out, for many it is. “About 40 per cent of people who tried to refinance were unable to do so,” Digital Finance Analytics principal Martin North said.”If you go back a year it was 5 per cent.”

The reason this is occurring is that, while those applicants cleared the bar for their original loans, that bar has now become a lot higher, following years of banking reform and the fallout from the banking royal commission. So, now, they simply don’t qualify for the same amount of debt they once did.

“When people took out the loans there was a lot of widespread fudging of the numbers,” chief investment officer with funds management firm, Forager Funds, Steve Johnson said.

“People were getting loans on the basis of a four person family having $30,000 a year of living costs living in Sydney. “And it’s quite clearly impossible to live in Sydney on that much money a year. “The biggest issue is that people have borrowed too much money relative to their income and that is a very difficult problem to unwind.”

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