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Serviceability impact now ‘is huge’ and affecting both borrower and broker stress levels, REA Group’s Anthony Waldron has explained.
While it might be a great time to be a broker, it is also not an easy time either, given the impact of stress levels on customers – because generally brokers “really care about the people”, a major brokerage executive has revealed.
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Speaking exclusively to The Adviser following the Reserve Bank of Australia (RBA) 6 December cash-rate announcement - REA Group’s Mortgage Choice financial services CEO Anthony Waldron candidly assessed the current rising-rate ‘state of play’ and the impact it was having on brokers at large as they collectively face helping millions of Australian mortgage holders best navigate these intense times.
Given many brokers have long-term trusted relationships with their customers, Mr Waldron said even more so now will re-financers and potential borrows rely on the third-party’s unique and needed skillset.
“It's a really interesting time to be in the market with interest rates rising like they are - another 25 points yesterday [Tuesday], now obviously customers need the help and advice of someone through this process,” Mr Waldron outlined.
“That makes it a really important time for brokers to be out talking to either their existing customers or new customers - because it's times like these you really [build] relationships.
“And it's also times like these where the value of the broker actually comes to the fore, for being able to shop around, being able to look at - depending who you're with – but 30 plus lenders and being able to then say [to customers] what is the best option opportunity for you right now, the best option, is really important - especially with the fixed rates expiries that are happening over the next year or so,” he overviewed.
“We're going to have so many customers go from rates that started with 1.8, 1.9 to 3.1 [per cent] sort of stuff all of a sudden going to be paying five plus per cent interest rates,” he cautioned.
“The impact on their cash flow is going to be massive - and so … ensuring that they're getting the best deal they can means, yes, it's a good time to be a broker – but not an easy time to be a broker,” he said.
“It is a really good [time] to be a broker in terms of you can really provide the help and guidance that a customer is going to need.”
Sharing the pain of borrower stress
Given the overwhelming and as-expected mental health impact and stress some borrowers will be feeling through this, and the focus on such, The Adviser asked Mr Waldron if brokers were being affected by the current rate environment and their customers’ plight.
“Yes, totally. Totally. I mean, you can't help at times take on your customer’s stress and brokers, generally, they really care about the people that they're placing into [loans]; these are long term relationships in many cases.
“They’ve known them for many years … they may have put them in the loan – and they are there now – so there’s that personal stress that you take on through that,” he stated.
Serviceability is making things worse
With loan buffers - factored in for safe repayment at loan origination - now virtually maxed out for many mortgage holders who signed on during pandemic-inflicted low cash-rate times, there’s another type of stress for brokers, Mr Waldron described.
“There's also that it’s harder to place a loan at times, at the moment,” he said.
“Since the rate increases started in May, the serviceability impact of the increasing rates is huge!
“So, if someone used to be able to borrow, say, a million dollars, they can now borrow … low seven hundreds, maybe 720 max.
“Also people who may be looking to refinance out because they're existing borrowers - they've come off a fixed rate or their current lender has increased the back-book pricing to be much higher than the front-book pricing - they may not be able to move because when [brokers] do a serviceability assessment on that loan, [customers] no longer can service [that loan] based on the current way that it would be assessed.”
“That's difficult, that’s hard - because you also as a broker know it means doing quite a bit of work and then having to come back [to the client to say] ‘actually the best thing I can do is work with your existing bank to get you the best deal you've got because you can't [move].”
[Related: 3.10% December cash rate confirmed: RBA]
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