Bank not to blame for woes caused by couple’s repayment obligations

Categories:

Advice & information, Bank decisions, Lending,

Summary:

Lacey and Dean obtained home loans with the bank in November 2021. Over time, they made various changes to their loans and extra payments. In 2024 some loans were on fixed interest rates, and some were on floating rates. In May 2025, they sought a loan at another bank but were declined due to high repayments on their existing loans. They complained that their high repayments were because the bank wrongly reduced the terms of their loans. They also said the bank broke a promise to extend the terms of the loans without requiring them to first complete a credit application. Lastly, they said the bank wrongly calculated backdated interest.

Published:

February 2026

Our investigation

We found the terms and conditions of the fixed-rate loans allowed Lacey and Dean to make extra payments only up to 5 per cent of the loan balance at the start of the fixed-rate period. The bank correctly applied the early repayment limit and proposed various solutions when their requested repayments exceeded this limit, including reducing the terms of the loans with their agreement. The bank’s advice to them about the early repayment limit was accurate and consistent with the terms and conditions of the loans. However, the variation letters the bank sent them after making these changes were unclear because they did not explicitly state that the loan terms had been reduced, a fact that caused confusion.

We also found the bank did not promise that it could extend the loans’ terms without first requiring Lacey and Dean to complete a credit application. Early on, the bank’s communications had made it clear that they would have to complete a credit application for this to happen. In any event, the bank promptly approved their application, although they did not proceed because of break fees. Finally, we found the bank made no systemic errors in how it calculated interest rates.