The increase in interest rates in October means home buyer borrowing capacity has dropped again.

While rates are still low, the average monthly borrower with a $500,000 mortgage, will pay $750 more a month than they would have before the rates started rising.

Analysis by PropTrack says this means a prospective home buyer will be able to borrow 21.6% less than before the rate rises.

Although the change in interest rates has some borrowers shopping around to refinance, those who bought at the peak of the market with low deposits may find it harder to switch according to Jarden chief economist Carlos Cacho.

He says some wishing to refinance will no longer pass a lenders’ stress test and be forced to stay with their current lender.

He has labelled them “mortgage prisoners” and believes 10% to 15% of outstanding home loans could be unable to move, with first home buyers who bought near the peak particularly exposed to the risk.