You have not borrowed another dollar, yet your loan just became riskier in your lender’s eyes. Analysis by Aussie Home Loans found that 20.7% of borrowers who bought between July 2023 and August 2025 now have a loan-to-value ratio (LVR) above 80% (Tchetchenian, 2026). For many of them, the cheapest refinance deals are now out of reach.

What is LVR and why does 80% matter?

LVR is your loan balance divided by your property’s value. Lenders typically let you refinance without lenders mortgage insurance (LMI) only if you have at least 20% equity, and you may have to pay LMI again even if you paid it on your original loan (Whiting & Cooper, 2026). LMI can cost $10,000 or more (Dargan, 2025), which can wipe out the saving from a cheaper rate.

How do falling values push your LVR up?

Your debt stays the same while the value underneath it shrinks. Here is an example using our own figures:

Buyers who started at 85% or 90% are pushed further away again.

Why are so many borrowers unable to refinance?

Equity is only half the problem. Lenders assess new loans at your interest rate plus a buffer, and APRA has kept that buffer at 3 percentage points (Australian Prudential Regulation Authority [APRA], 2026). As rates rise, some borrowers who qualified for their original loan fail the test for a new one.

Finder’s 2026 Home Loan Report found only 45% of borrowers say they could switch home loans right now. Among the barriers, 22% cited income that is too low or expenses that are too high, and 14% said they lacked enough equity (Whitten, 2026). The Mortgage & Finance Association of Australia found that 49.2% of brokers surveyed had seen more clients unable to refinance because of serviceability, up from 24.4% six months earlier (Tchetchenian, 2026).

Is an LVR above 80% the same as negative equity?

No. Negative equity means the loan is larger than the property’s value, and it remains uncommon in Australia (Dargan, 2026). An LVR of 84% limits your options. It does not mean you have lost money unless you need to sell.

If you can keep making repayments and do not need to sell or refinance, reduced equity may have little immediate effect (Dargan, 2026).

What can you do if your LVR is above 80%?

Ask your current lender for a better rate. Repricing with your existing lender is different from refinancing elsewhere, where LMI can apply. It is not guaranteed, and your equity can still affect it (Unloan, 2026), but it is the first call to make.

Compare valuations. A new lender will usually value your property as part of the application (Whiting & Cooper, 2026). Valuations differ, and a few percentage points can decide whether LMI applies.

Look at higher-LVR refinance options. Some lenders refinance up to 85% LVR with LMI waived, though rates vary widely when equity is lower (Dargan, 2025).

Direct spare cash at the loan balance. Extra repayments reduce the balance used to calculate LVR. Money in an offset account cuts interest, but the loan balance itself stays the same.

Rethink equity release plans. Falling values reduce the equity you can access, and cash-out refinancing is not possible in negative equity (Dargan, 2025).

What does this mean for buyers now?

Your equity buffer is part of your borrowing strategy, not just your deposit. Buying with more than 20% equity, or keeping cash in reserve, protects your ability to refinance if values fall after settlement. Paying the right price matters too, because equity you overpay away on day one is equity you cannot use later.

Frequently asked questions

Can I refinance if my LVR is over 80%? Often yes, but options narrow and LMI may apply. Serviceability, credit history, the property and lender policy also affect the outcome.

What is a mortgage prisoner? A borrower who cannot refinance to a cheaper loan, usually because of reduced equity or failing a new lender’s serviceability test.

Does a higher LVR change my repayments? Not on your current loan. It affects your ability to switch lenders, access equity or secure a sharper rate.

This article is general information only. Speak to a licensed credit adviser before making borrowing decisions.

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