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Mortgage market pioneer Mark Bouris says those on fixed rates will soon be paying the standard variable rate if they are unable to refinance.
Speaking on The Adviser’s In Focus podcast, the Yellow Brick Road executive chairman said he can’t see banks being sympathetic to borrowers facing mortgage stress.
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“To be fixed rate borrower, you probably borrowed in the last two or three years, which means your fixed rate is coming off this year or next year,” Mr Bouris said.
“You’re going to revert to a standard variable rate. The banks know whether [or] not you can refinance and if you can’t, they’re more than likely to apply to you the standard variable rate, not the discounted rate.”
Short-term fixed loan rates averaged as low as 1.95 per cent in May 2021 for owner-occupiers. Today’s standard variable rates are around 6 per cent. A borrower on a $1 million mortgage will see their monthly repayments rise from $3,700 to $6,000.
“I don’t think the banks will price gouge intentionally, but they won’t be sympathetic,” Mr Bouris said.
“In other words, for those people who they know can’t go anywhere, they’re more than likely going to hit them straight up with the standard rate.”
In its October Financial Stability Review, the Reserve Bank highlighted that around two-thirds of the 35 per cent outstanding fixed mortgage debt would expire in 2023.
With the so-called fixed-rate ‘cliff’ looming, the role of mortgage brokers has never been more important, Mr Bouris said.
“How do those borrowers now ensure they are getting the best variable rate? Brokers provide a unique service to these individuals, assuming they’re not in too much debt and alternative [options] are available,” he said.
“The banks will give those brokers discounts to make sure they can continue to satisfy their customer’s requirements. If we had no brokers, we’d all be paying a standard variable rate, unless you’re a really important customer to that particular bank. Brokers tend to have the ability to put the banks on their best behaviour.”
The Yellow Brick Road boss said he is not surprised that seven out of 10 Australians use a broker.
“Brokers keep Australians well banked. They are a national treasure. They are so knowledgeable and important to us as borrowers. Lenders could not operate without them as efficiently,” he said.
You can listen to the full In Focus podcast with Mark Bouris, here:
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