Broker value amplified in rising rate environment
With interest rates having risen 75 bps in less than six weeks – and expectations that the cash rate could reach more than 2 per cent by the end of the calendar year – Australian borrowers are in for an education.
After 11 years of decreasing rates, a large proportion of borrowers are now starting to see mortgage repayments increase for the first time. And, with property prices cooling after a bumper two years, many mortgagors are looking at whether they will be able to afford the home loan repayments and what their financial position looks like moving forward.
Brokers in demand to help borrowers navigate changing rates
As such, mortgage brokers are finding themselves increasingly busy answering calls and having meetings with both existing and prospective borrowers to help them navigate the changing economic environment, reprice and refinance their home loans, or, in some cases, just offer some comfort and support.
Speaking to The Adviser for the Elite Broker podcast, Queensland-based broker Ryan Baddock, from RB Finance, said: “It’s been hectic on the phone talking to a lot of people… about how they can manage their interest costs. And how they can use strategies to reduce debt, and in turn, reduce their interest cost, manage their exposure, and just try and get the best outcome they possibly can. This is something that we spend a lot of time doing.
“And we pride ourselves on being down-to-earth, normal people that we can translate some of the jargon, and some of the hysteria to try and provide a bit of comfort and confidence to our borrowers,” he said.
“But we certainly have been busy on the phone just chatting to a few people, and making sure that everyone knows what options are available to them and actually knows what the impact is going to be from a 1 per cent rate rise on their mortgage and what that means weekly. And how far in front are they of their mortgage, and what they have been saving, and all those types of things.
“We just really want to make it relatable and realistic to people, as opposed to some of the things that comes through from the media and so forth at times around the hysteria that we know gets played out.”
Emma Cattermole from Wealthfolio said that her team has found they’re spending more time educating clients on their strategies, objectives and ambitions.
“Most of the education is on Zoom meetings, or face to face… in the appointments with the clients. It’s just really understanding what they are trying to achieve, what their goals and aspirations are and then just helping them throughout that,” she told The Adviser.
“I’ve been doing this a long time, and I think that clients love that fact as well. They know that I’m experienced and I like to educate them.”
Similarly, Paul Hixon from Loan Market in Brisbane’s New Farm, told Elite Broker that his team is now “forcing the subject” of increasing rates with borrowers to ensure they can service loans should the rate crept up to 4 per cent. That way, they can ensure that “homes [are] not going to be under pressure in the future”.
He added that his team has also been actively repricing borrowers on their back book too, and saved $28,000 for their existing customers in the month of March alone by being proactive on repricing requests.
Politicians champion brokers
Mortgage Choice national sales director David Zammit commented last week that, with interest rates expected to rise several more times this year, borrowers should be speaking to brokers about reviewing their home loan – particularly as more than half are hesitant to refinance.
But the broking industry is finding champions from outside of the broking industry, too.
On Wednesday (8 June), One Nation leader Pauline Hanson took to Facebook to post a call to action to borrowers.
“Following two considerable cash rate increases by the Reserve Bank of Australia (RBA), it is inevitable that homeowners on variable rates will pay more to keep their home,” she wrote.
“The back-to-back rate rises are designed to slow down discretionary spending in our economy. In other words, make people rethink or curb their non essential spending like coffees and clothes.
“Anyone on a variable home loan should think about speaking with a mortgage broker who will compare your current loan arrangements with every lending Institute in the market.
“If you can save yourself money in these uncertain times. You owe it to yourself to do so. If you expect loyalty, buy a dog, don’t rely on a bank!”
Labor politicians have also flagged the important role of brokers as rates increase – with the financial services minister and assistant treasurer, Stephen Jones MP, telling The Adviser in February (when he was still acting in a shadow capacity) that he wants “brokers to be 100 per cent focused on ensuring that everyone on their books has access to the best-priced mortgage at a time when we know mortgage rates are going to go up and cost living pressures are huge”.
He revealed that he had himself saved money by using a broker, stating: “I did it, and I can absolutely guarantee that I’m paying less on my mortgage today, and probably will be well into the future, because I took that step and reached out to a broker.
“So, I see the value that you guys bring and more strength to your arm. I’m better off for it, and so are millions of Australians,” Mr Jones said, noting that brokers are “now the major front door for customers entering the residential mortgage market”.
“[Brokers] are, overwhelmingly now, the majority entry point for ordinary customers entering the mortgage market.
“Customers are getting a good deal. I can speak from personal experience that customers are getting a good deal because they consult with their credit adviser; their mortgage broker.”
Even the banks themselves have even been suggesting that borrowers speak to brokers, with the Commonwealth Bank of Australia’s executive general manager of home buying, Dr Michael Baumann, stating earlier this month that the change “highlights the important role lenders and brokers play in supporting customers in the current environment”.
“We also encourage customers to speak with us about how we can support them via our extensive network of lenders and brokers,” he said.
While the early 2020s were characterised by a boom in broker market share as the property market took off and many home buyers entered the market for the first time, the next few years will surely see broker market share continue to reach new heights as more and more borrowers require professionals to help them understand, manage and navigate the new interest rate cycle.