The news that further out-of-cycle rate rises are likely to occur following the impending federal election should make brokers wary of consumer anger, says one Melbourne mortgage broker.
Analysis from investment bank Morgan Stanley has suggested there is a “high probability” that banks will increase rates out of cycle with the Reserve Bank, but only after the federal election in order not to interfere with the government’s campaigning.
That could lead to frustration among mortgage holders, believes Stuart Wemyss of ProSolution Private Clients.
“The main issue is that an out-of-cycle rate rise will create anger, and brokers need to be on the front foot to deal with this,” he told Australian Broker
. “It requires a bit of an educational approach to essentially confirm [to a client] that one, all banks are the same and they all put shareholders ahead of customers and two, we aren’t doing Bank X a favour by giving them your business.”
He added that amid fluctuating rates, brokers should emphasise to clients that brokers have no allegiances to banks, and that “clients need reassurance that brokers are looking after their best interests”.
Wemyss states that the message to clients should be, “The fact is that Bank X suits your needs and circumstances best. If that was ever to change, we would recommend taking your business elsewhere. That is why we review loans annually. We understand that the bank’s behaviour might upset or annoy you but instead, focus on the fact that they are the best lender for you.”
However, there are certain advantages for brokers in the wake of out-of-cycle rate hikes, Wemyss says.
“Out-of-cycle rate rises, driven by a desire to generate short-term profit at the expense of creating long-term value with customers, actually pushes borrowers closer to brokers – so its ultimately good for the industry."