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The proactive client service and commitment of mortgage brokers in their local communities is seeing them put borrowers ahead of the game when it comes to surviving successive rate rises.
Following the RBA’s decision to raise the official cash rate to 3.35% last week, there have been fears borrowers will start falling behind, particularly those soon rolling off cheap fixed rate loans.
However Brisbane mortgage broker David French (pictured above left) from The Happy Finance Company said he was not expecting a huge impact at this stage from borrowers falling over a future “fixed rate cliff”.
French said over the last couple of years, most clients of the Queensland brokerage he had worked with had been encouraged not to go ahead and borrow near their maximum capacity.
“Our general advice has been to budget for the higher rates, and to make those extra repayments by either saving or having a buffer in an offset account for variable loans,” he said.
French said The Happy Finance Company has engaged in “constant education with our client base”, letting them know early on that interest rates were going to be increasing and to be prepared.
He expects there will be borrowers across Australia in trouble if their home loans reach 5.25% - the stress test level they were assessed at – for the borrowers who went to maximum capacity.
“They are going to struggle. Higher home loan repayments on top of inflation and cost of living expenses is going to have a big impact on those borrowers,” French said.
Just like with his current client base, French recommends those borrowers save a cash buffer to assist with higher repayments, and look for cost of living reductions where possible.
Astute Financial Manly principal Sam Ayliffe (pictured above centre) said he believed one reason owner-occupier clients were being assessed at 7.5% – and not a higher rate – was because of the strength of the third party channel.
Between July and September 2022, mortgage brokers broke another record when they facilitated 71.7% of all new residential home loans, according to research commissioned by the MFAA.
It was the first time broker market share was over 70% in the 40 consecutive quarters the measure has been tracked, and was up 11.6% on the same quarter in 2020.
“We are seeing banks willing to give us the biggest discounts ever off of standard variable rates,” Ayliffe said. “We are now getting our investor clients a 3% discount off the standard investment rate; when I started out you’d be lucky to get a 1.1% discount, or maybe up to 1.25%.”
“I suspect that is one of the reasons the interest rates on offer are in the high fours. The third party channel has been bringing such strong competition into the market.”
TSC Mortgage Brokers’ Matt Punter (pictured above right) has been undertaking a repricing campaign for the last six months, focusing on variable rate customers and those moving off fixed rates.
He said repricing loans or refinancing deals was not as productive as winning a new client, but remained a powerful way of demonstrating the brokers’ value and building the loyalty of the client.
“It is a wonderful retention exercise, to let them know you have saved them 0.2, 0.3 or 0.4 of a per cent, but then letting them know we’re also happy to look at the market for them,” Punter said.
If a client thinks TSC Mortgage Brokers is a valuable resource, they are likely to come back before clicking somewhere else online or shifting somewhere else after a conversation at a barbecue, he said.
