Australian mortgage brokers and their customers have made it through 12 interest rate hikes in 13 months.
With another possible rate hike or hikes on the horizon, Australian Broker reached out to two senior brokers to discover the effect of rising rates on their clients and business and the strategies they’ve employed to keep everything on track.
“I can’t say it’s been 100% perfect, said Emmanuel Marios (pictured above left), chief operating officer and mortgage broker at Derwent Finance. “There’s always going to be clients that are finding it tough.”
Australian homebuyers have come under increasing stress in recent months. Aussie’s recent 12th Rate Rise Effect Report, which surveyed 1,000 Australian homeowners, found that rising rates have left households facing significant financial hardship, with 29% of respondents struggling to make their higher repayments and 13% worried they could default on their loan.
Notably, the survey found one in four borrowers said the rising rates had left their long-term financial security at risk.
Nearly half (47%) of Australian mortgage holders have made changes to their home loan including 11% who sold their property, according to a Canstar survey.
One strategy Marios’ team employed to proactively counter this mortgage stress, was to provide complimentary budgeting spreadsheets to their clients early in the year.
“We prefilled it out for them and said ‘here’s a grasp of an idea of what we think is in place for you. We suggest you open it, adjust it, and prepare yourself for more rate rises’,” Marios said.
While he always recommended a financial planner, Marios said building a profile based on data from when the customer took out the loan and updating it to account for any changes was the “general advice customers need”.
“We’ve had some fantastic responses back from customers saying they are thankful that we sent it to them back in January because the money they’ve saved every fortnight in that time is coming in handy now.”
“If we didn’t provide it back then they wouldn’t be happy now, that’s for sure. They would have really struggled.”
Keeping close contact
Another strategy brokers have used is to inform their clients as much as possible.
Bernard Desmond (pictured above right), founder and chief executive officer at Blank Financial, said as a business, they had stayed in “very close contact” with their clients and were proactive about conducting rate reviews.
“We are seeing an increase in refinance and debt consolidation deals, and I personally believe now is a great opportunity for mortgage brokers showcase their skill set and talent to borrowers as its difficult to get deals serviced,” Desmond said.
“We have one staff member only doing pricing and valuations so we can reprice our existing clients, in most cases we have been able to sharpen their rates and call them with a positive news of a rate drop than what they have been experiencing from banks and lenders.”
Marios agreed, saying he made it a company rule to touch base with clients every 90 days.
“We have a strict policy in place now because we need to provide our clients with guidance about what might happen before it’s too late,” Marios said.
“We must let them know, are you ready and prepared for what’s about to come? And in most cases, people are not. So, if we can provide value up front it’ll be better in the long run for everyone.”
Don’t stress on the things you can’t control
While rate rises were difficult for many, Desmond said there was an important lesson to be learned for customers and brokers alike: “you can’t control what the weather does, only what you wear.”
“Rate rises are out of our control, so the conversations I am having with our clients is let’s look at your balance sheet and see where we can help restructure and save, by either consolidating or doing a review of their finances if the structures they put in place are still relevant in today’s market,” Desmond said.
Desmond urged brokers to help clients navigate and give them the guidance to make better informed decisions.
“The motivation to buy a home should be beyond what the current rates are, we always start with understanding our clients’ needs and what’s motivating them to take on home loan debt.”
Marios agreed, although he hoped the next RBA announcement would be a pause.
“It’ll be nice to come to work and not have hundreds of emails from customers saying ‘all right, it’s gone up again … now what?’ ”.
Have you got any strategies for dealing with rising rates? Let us know below.
