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High interest rates, cost-of-living pressures, and high serviceability buffers have hindered many borrowers from obtaining their dream home.
Serviceability continues to be a major hurdle for many borrowers trying to break into the property market, despite interest rates having seemingly hit their peak, according to bank economists.
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Speaking to The Adviser, director and principal mortgage broker at More Than Mortgages, Deanna “De” Ezzy, shed some light on how she has been helping clients navigate the current serviceability climate.
“I’m just teaching people more about how to manage their money,” Ms Ezzy said.
“I’ve had a lot more of those sorts of conversations, so I’ve been sending them the Moneysmart budget planner, and tell them to go through 12 months’ worth of bank statements so they can work out where they’re spending all their money, and figure out where they can realistically cut back on anything.
“After that, I’ll send them a diagram of how I would suggest to structure their accounts, and typically for one person, it’s four different accounts, such as groceries accounts, etc.”
Ms Ezzy added that clients should prioritise what they’re paying off in regard to debts to improve their chances at approval.
“All your credit cards and ‘garbage’ debt are wrecking serviceability. If serviceability is tight, you want everything else in the application to be strong,” Ms Ezzy said.
“I’ll tell my clients to get their credit score as good as it possibly can be, don’t apply for any additional credit and to keep on top of their repayments.”
In regard to trends in serviceability for the year ahead, Ms Ezzy predicted that it’ll “remain really consistent”.
“I’d be surprised [if it changed] because a lot of the banks over the last three to six months have done a lot to improve serviceability, I don’t really know how much further they can go without APRA cracking down on them!” Ms Ezzy said.
Additionally, speaking on the Mortgage and Finance podcast on The Adviser’s sister brand Mortgage Business, found and director of Purple Circle Finance, Greg Pennells, said that a lot of mortgage brokers are frustrated because “what seems logical doesn’t seem to be logical [to assessors]”.
“Coming back from some lenders, they’ve kind of got this tick and flick type approach and if it’s not vanilla, then it’s no – or it goes to the bottom of the pile,” Mr Pennells said.
"That sort of thing is a little bit frustrating because they’ve pushed lending to an almost automated type of process. The reason brokers are successful is because people like people and people understand people. And I guess there’s a lot of frustration with that side of lending.”
[RELATED: Affordability and serviceability will continue to bite in 2024: Brighten]
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