Mortgage holders who snapped up record low fixed interest rates over the past few years are unsure where to turn now they are due to expire.
Variable mortgage rates have skyrocketed following eight consecutive official cash rate rises since May, coupled with the impacts of loan serviceability and the rising cost-of-living.
Mortgage broking franchise Resolve Finance surveyed more than 1,000 mortgage holders nationwide and found 58% plan to do nothing with regards to property over the next 12 months, while 22% plan to borrow money or refinance to renovate and 12% want to sell their home to upsize.
What fixed rate borrowers plan to do
For those with a fixed rate mortgage due to expire (known in the industry as the “fixed rate cliff”), 50% plan to refinance immediately, while 41% plan to do so later to see what happens with interest rates. Only 9% plan to move to their lender’s standard variable rate and not refinance and 20% say their monthly mortgage repayments only need to increase by an additional $500 before they become unaffordable and will be forced to sell.
Resolve Finance managing director Don Crellin (pictured above) said many Australians were unsure what lever to pull to try and insulate themselves and their families as economic conditions changed.
“We are seeing a dramatic shift in the proportion of family budgets now being eaten up by mortgage repayments and for most Australians this will increase as fixed interest loans expire and interest rates continue to rise,” Crellin said.
“While this is a daunting situation for many consumers, mortgage brokers are well placed to help consumers seek out the right mortgage deal to suit their circumstances.”
Brokers can help clients find best mortgages
Crellin said for brokers, there had never been a better time to demonstrate the wider benefits they deliver to their customers.
“During times of uncertainty, it’s much more than a discussion around interest rates and product suitability,” he said.
“It’s about providing strategic advice, being a financial coach and sounding board to help steer our customers through these uncertain times. In playing the role of a trusted finance partner, it helps to cement the customer/broker relationship for the longer term as the value provided goes much further than the any one transaction.”
Crellin said brokers should be more active in their communities as this provides a strong strategy to build relationships, brand awareness and visibility.
“If done correctly, it helps to build advocates leading to a more loyal customer base and think of this as a long-term strategy rather than a tactical marketing exercise,” he said.
“With any brand awareness exercise, you are essentially laying the foundations for future success. The other important factor is that you need to take an active and passionate approach rather than just relying on providing sponsorship dollars, a sign or an advertisement in a monthly newsletter. Playing an active role and being present in a sporting club or local association will help to maximise your investment.”
Helping clients during uncertain times
Resolve Finance has launched a consumer campaign “Are you rate ready?” which includes a fixed rate loan comparison tool and an easy-to-follow checklist for consumers to work through so they can confidently prepare for a timely mortgage review.
“There are some simple steps consumers can take help them navigate these changing mortgage conditions and provide more certainty over their future expenses,” Crellin said.
“These include locating current mortgage details, so consumers know the exact expiry date of their fixed rate, how much they owe on the loan and what rate they are currently paying.”
Last year was a big year for Resolve Finance, after announcing it settled $1.5 billion in loans during 2022. The franchise has offices in Perth, Bunbury and Melbourne and attributes its success to its mortgage brokers, with more than 70% of them aged under 50 and a mix of female and multilingual franchisees joining the business.
Resolve Finance Derrimut franchisee Niti Bhargava, who is originally from India and migrated to Australia 18 years ago, is on a mission to educate women about the importance of looking after their finances.
“During my career in the finance industry, I have seen an alarming gap in the knowledge of females lacking an understanding when it comes to their financial circumstances, especially those women who have relocated to Australia from countries in Southeast Asia,” Bhargava said.
“So, I decided three years ago when I started my own business that it was the perfect time to start giving back to my community.”
She began conducting short financial education segments on radio (Radio Sanjhi Awaaz Melbourne) and TV (A1TV Entertainment) in both Punjabi and Hindi. She’s also an active member of the social group Indian Women in Australia and conducts fortnightly sessions via social media.
Are you on a fixed rate and not sure what do next? Let us know in the comments section below.
