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The mortgage-regret economy: Why borrower confusion is reshaping Australia’s home-loan playbook
Borrow
The mortgage-regret economy: Why borrower confusion is reshaping Australia’s home-loan playbook
Mortgage regret has become a measurable market force, driving record refinancing, rising arrears off a low base, and a scramble by lenders and brokers to redesign the borrower journey. With the Reserve Bank’s rapid rate rises since 2022 and fixed-rate roll-offs exposing affordability gaps, mistakes made at origination are echoing through balance sheets. The result: a new competitive frontier built around advice quality, data-driven suitability, and post-settlement care. Business leaders that treat regret as a solvable design problem—not just a consumer sentiment—can capture share and de-risk portfolios.
The mortgage-regret economy: Why borrower confusion is reshaping Australia’s home-loan playbook
Mortgage regret has become a measurable market force, driving record refinancing, rising arrears off a low base, and a scramble by lenders and brokers to redesign the borrower journey. With the Reserve Bank’s rapid rate rises since 2022 and fixed-rate roll-offs exposing affordability gaps, mistakes made at origination are echoing through balance sheets. The result: a new competitive frontier built around advice quality, data-driven suitability, and post-settlement care. Business leaders that treat regret as a solvable design problem—not just a consumer sentiment—can capture share and de-risk portfolios.

Key implication: Mortgage regret is no longer a soft consumer metric; it is a hard driver of churn, cost-to-serve, and credit risk. In Australia, the Reserve Bank’s fast cycle to a 4.35% cash rate (from 0.10% in 2022) coincided with record monthly refinancing above A$20bn in 2023, according to ABS figures, as borrowers sought to unwind earlier decisions. This shift is forcing lenders, brokers and fintechs to rebuild the home-loan journey around decision quality, not just price.
Business impact: A margin, churn and risk story
The borrower journey is leaking value at three points: pre-approval suitability, product configuration, and post-settlement management. Each leak shows up on P&L. First, poorly matched products (for example, high-fee packages or misused offset accounts) increase early churn and rebate costs. Second, serviceability stress raises collection costs and arrears risk—S&P Global Ratings has flagged rising arrears off their pandemic-era lows, particularly in the 2020–21 vintages that refinanced into higher rates. Third, complaints and remediation lift non-interest expense. Add it up and mortgage regret becomes a stealth tax on ROE.
For distribution, there’s a notable shift: brokers now originate roughly 70% of new Australian home loans, per industry bodies, making advice quality a systemic factor. Where brokers improve suitability and post-settlement coaching, lenders see lower churn and steadier NIM through the cycle. Where they don’t, portfolios suffer higher switching and loss of share-of-wallet.
Market trends: The regret-fuelled refinancing flywheel
Three macro undercurrents are amplifying borrower mistakes into market signals:

- Rate volatility and fixed-rate cliffs: As cheap fixed loans matured in 2023–24, many households discovered affordability gaps they hadn’t modelled. Refinancing surged as borrowers hunted for rate relief and cashbacks.
- Policy and prudential settings: APRA’s 3 percentage point serviceability buffer protected system stability, but it also steered some borrowers into shorter terms or features they later didn’t use effectively, setting up dissatisfaction.
- Digital discovery gap: Borrowers research online, but many tools optimise for lead capture, not comprehension. The result: confident clicks, fragile decisions.
Globally, the pattern rhymes. The UK and US saw similar rises in remortgaging/loan modifications as rates climbed, underscoring that regret is a structural response to volatile funding costs and information asymmetry—not a uniquely Australian issue.
Technical deep dive: Turning suitability into a data product
Fixing regret requires moving from brochureware to decisionware. Four capabilities stand out:
- Open Banking-driven affordability modelling: Using Consumer Data Right data to ingest real transaction histories yields more accurate expense and income estimates than self-reporting, reducing mis-sizing mistakes. Lenders using dynamic expense categorisation can cut variance between stated and actual living costs and provide realistic buffers.
- Scenario engines at pre-approval: Stress-testing repayments across multiple rate paths, offset usage patterns, and life events (parental leave, second car, rentvesting) makes trade-offs explicit. Think “what-if” modelling embedded in broker CRMs and bank apps.
- Post-settlement nudging: Behavioural prompts—auto-sweeping surplus cash into offsets, alerts on redraw vs offset tax consequences, and renewal price checks—convert intent into action and reduce bill shock.
- LLM-assisted guidance with guardrails: Generative AI can translate product fine print into plain English and compare structures (split loans, IO vs P&I), provided outputs are constrained by policy and validated by credit rules.
These are not just CX features; they are risk controls. Suitability that is modelled, monitored, and nudged becomes a protective moat.
Competitive advantage: Design for “no surprises” and win share
Early movers are competing on “no surprises” as a brand promise. The playbook:
- Advice-as-a-service: Brokers productising annual mortgage reviews with portfolio dashboards and proactive rate check-ins. A subscription-style care model reduces reactive churn and increases referrals.
- Feature utilisation guarantees: Lenders tying package fees to actual usage (for example, offset activation thresholds) and offering fee rebates if features go unused—pinching short-term fee income but lifting lifetime value.
- Education with teeth: Short, interactive modules at key milestones (pre-approval, settlement, year one) with comprehension checks. Completion can unlock fee discounts, aligning incentives.
- Transparent repricing policy: Publishing repricing schedules and automating best-rate moves for in-book customers curbs the perception that loyalty is penalised—trading some NIM for lower churn and higher advocacy.
Implementation reality: Operating model upgrades, not just UX
Adopting this agenda is non-trivial. Practical challenges include:
- Data plumbing: Integrating CDR data into credit and product systems requires lineage tracking and consent orchestration. Firms need a clear data minimisation stance to maintain trust.
- Broker enablement: With most flows via brokers, lenders should embed tools into broker CRMs, not bolt on portals. Co-branded scenario reports and a single source of truth for policy reduce rework.
- Incentives and governance: Shift scorecards from pure volume/yield to “quality of advice” metrics—feature utilisation, complaint rates, early churn, and arrears by channel. Link bonuses to long-term outcomes.
- Compliance by design: Documenting rationale for product choice (including options not chosen) creates an audit trail that satisfies conduct expectations and streamlines remediation if needed.
Composite case examples illustrate the value. A first-home buyer who selected a package loan for the credit card perks but left the offset dormant paid hundreds extra each month; a broker-led annual review that moved them to a simpler product with auto-sweep cut costs and prevented a refinance out. Another household split their loan 70/30 fixed-variable without modelling childcare leave—repricing plus a redraw misuse created cash-flow stress; a lender’s nudge programme reframed repayments and restored buffers.
Policy and industry lens: Closing the literacy and transparency gaps
Regulators have signalled ongoing focus on responsible lending and fair treatment for existing customers. Expect continued scrutiny of repricing practices and clarity of comparison rates, especially around fees and feature conditions. Industry bodies are also pushing financial literacy measures that go beyond brochures to interactive, life-stage coaching.
There’s a broader societal dividend: improved mortgage decision quality reduces systemic stress and supports more stable consumption. For banks, fewer distressed restructures; for households, fewer expensive course-corrections; for brokers, stronger repeat business.
Future outlook: From product to partnership
The next competitive era will measure success by outcome stability, not just approvals. Lenders and brokers that operationalise three disciplines—predictive suitability, proactive stewardship, and transparent value—will convert the mortgage-regret economy into a growth market. The technology is available; the differentiator is governance and incentives. In a world of persistent rate uncertainty, the most bankable asset is a customer who feels they made a good decision—and can prove it a year later.

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