Brokers reveal borrowers’ top rising-rate questions — and why

The preference for the third-party channel was recently demonstrated in data commissioned by the Mortgage & Finance Association of Australia (MFAA) and conducted by Comparator — a CoreLogic business. It revealed mortgage brokers facilitated a record 71.7 per cent of all new residential home loans between July and September 2022.

With Australian borrowers having now experienced eight consecutive cash-rate rises since May 2022, taking the current rate to 3.10 per cent, for many borrowers their budgets, spending patterns, and home-loan repayment strategies have all been affected unexpectedly.

The spike in mortgage refinancing is permeating the industry and borrower concerns and stress are increasingly translating into stress for mortgage brokers as they help steer their worried clients through the interest-rate rough seas.

To understand what borrowers are concerned about, The Adviser asked a cross-section of brokers what they were hearing. We wanted to know if the current rising-rate environment has changed the type of questions borrowers were asking brokers; whether borrowers are asking the right questions at all; and how brokers are best handling the new borrowers’ queries and requests. 

Here's what they had to say....

Louisa Sanghera — Zippy Financial Group (NSW)

Louisa Sanghera,  the winner of the Women in Finance Awards’ Mortgage Broker of the Year 2022, said she gets asked about borrowing amounts and variable versus fixed rates and occasionally about fixing rates later. However, ‘Can you get cashbacks?’ is really common now, she explained.

Ms Sanghera added that even when borrowers are presented with the three best interest rates, they’d ask, ‘Is that the best rate you can get — it’s a high rate?’. They also ask: ‘I’ve been to a couple of other brokers and they can only get me $x dollars — can you get me more money?'.  Ms Sanghera said this was happening "a lot" at the moment.

Other questions she is currently being asked by clients include: "Do you look at online lenders? and 'Do you have ethical lenders?’" which she said is increasingly being asked.

“One couple recently were first home buyers and said to me 'I don’t care what the rate is, we want an ethical lender. This is the biggest purchase of our lives and we couldn’t live with ourselves if we didn’t use an ethical lender',” Ms Sanghera explained.

“Right now we are also being asked all the time if they should fix or stay variable. I wish I had a crystal ball.

“I am stating to clients that fixed are high and if rates do go down during their fixed-rate terms and their fixed rate is high, they’ll lose out.

“As brokers we need to be careful here as, although we have experience and a reasonable understanding of interest movements and trends, you never know what is going to happen in the world that can all of a sudden impact interest rates," she said.

“People should definitely ask brokers how many banks they have. Franchises tend to have very small panels of lenders in the low 20s, whereas independents have large panels 45+ to choose from.

“People should ask brokers ‘how busy are you right now?’, ‘what are your turnaround times?’, ‘do you have the time to take on my scenario and turn this around for me?’”

Getting the full picture is crucial

Ms Sanghera emphasised that borrowers should fully explain their situation and their expectations to brokers.

“If someone is going through a divorce and wants the broker to run their numbers to see what they can buy, and they need a lot of time to explain things as they have no financial knowledge or understanding, no idea on cashflow and they need someone who can spend a lot of time with them and hand hold them through the process — they need to state this.

“The broker needs to judge [if they have] time to take on these clients with their workloads; can they give the clients the time they need right now?

“Clients should ask the broker what their process is so they understand it. Some people may not like having to complete an online Fact Find, for example; they may want someone to sit with them and complete the online forms for them.

“Clients should ask if the broker does home appointments, or all online. I do get asked this and I don’t offer home appointments anymore, so I am not the right broker for someone looking for that service.”

She added that clients should ask the broker if they will be working with you or one of your staff, as if they only want to deal with the broker directly [then] they “need to know if that broker can do that”.

They should ask if the broker charges any fees, as brokers are charging fees now, and importantly they should ask how [the broker] analyses cashflow and living expenses, Ms Sanghera added.

“If the broker states they don’t look at their cashflow and they use a basic living expense figure provided by the bank (HEMS), the client shouldn’t be happy with that. They want a broker that is going to actually look at their living expenses and check their ‘actual’ cashflow to ensure they can afford the mortgage — not just use a HEMS figure.”

Dean Naylor — Mortgage Choice (Qld)

Servicing the Springwood, Bundall, & Paradise Point areas in Queensland, Mortgage Choice broker, Dean Naylor, said there are so many questions borrowers should ask but don’t or are missing from mainstream checklists that borrowers might refer to.

“Ultimately it depends on the transaction or inquiry, but the ‘super common’ ones are: How do variable rates work vs fixed rates? What deposit goal do I need for x purchase price? Can you tell me more about the first home buyer schemes?” Mr Naylor explained.

He added they’ll also ask about making additional repayments and ‘Does my rate change when I pay more off?’. ‘How much do I need in savings for my offset account to be worth it (i.e. it covers the fees involved)?’ also comes up.

“Clients are increasingly looking for market direction information,” Mr Naylor explained.

“Although rates are volatile and subject to multiple things, I’m receiving daily calls [from] clients who are requesting my opinion on the matter. I politely let everyone know I can’t tell them what to do, but I can inform them 95 per cent of my clients aren’t taking on fixed rates.

In terms of what borrowers should be asking brokers, Mr Naylor explained: “‘Will my borrowing power be affected by rate increases?’ This one is something I’ve made every single client I have aware of.

“They need to be advised that there is inevitably going to be decreased borrowing power monthly due to rate increases. Inflation also means clients are being assessed with higher HEM expenditure, which further hurts this.

“I send lots of my clients repayment tables showing what they can potentially be looking at if rates continue to rise. I like them to be well informed [as] in the current market their quoted repayment means very little as it’s changing every four weeks.

“People often come to me with tunnel vision. They’re looking for a specific price and specific property, but don’t think about what that looks like week in, week out, for 30 years. Some clients have a bad habit of comparing it to what they’re currently paying in rent, which isn’t comparable currently as it was a year ago.”

In terms of clients asking about increasing their borrowing power, Mr Naylor said that as most people have a fixed income with multiple expenses, they don’t realise clearing a credit card or a personal [loan] adds thousands onto their borrowing power.

Existing mortgagors should be calling their broker to check if their rate is still competitive, he advised.

In terms of any changed trends, as this would change depending on location, he said: “In our Gold Coast office we are seeing slow upticks in unit purchases. In our Brisbane office we see a higher number of builds. Trends are subject to the local market. I have seen an uptick in people not pushing for their maximum lend.

“I get clients — mainly first home buyers — who get fixated on their dream home up front and try for the absolute maximum lend they can get in an environment where their borrowing power is declining month on month, not a good mix.”

Scott Zwieger — Asmymkia Pty Ltd (Victoria)

North-east-Melbourne mortgage broker, Scott Zwieger, said that given he deals with a range of clients and their knowledge and experience in financial matters vary, the type of questions he receives falls into three categories: questions everyone asks; questions he’s been asked often; and ‘left field’ questions.

“We have the obvious questions of: ‘How much will rates increase and how will they affect my repayments? ‘Can I spread out my repayments for a longer term?’ is another common question,” Mr Zwieger explained.

Questions very commonly asked now include: ‘Wasn’t the loan assessed at a higher rate at the time of application?’; ‘Why doesn’t the Reserve Bank cap rates?’; ‘Should I split my loan into fixed and variable parts or go fixed totally?’; ‘Where are fixed rates going?; and ‘My broker said rates were going to stay low, why are they going up?’ Mr Zwieger highlighted.

“The more esoteric questions I get are the ones such as: ‘Why do banks lift rates so soon after the RBA lifts them, but are slow to reduce them when rates go down?’; plus ‘Why do the banks want to profit more out of the client in times like these?’; and this one, ‘How many repayments can I miss before foreclosure happens?’” Mr Zwieger explained.

[Related: Mortgage serviceability a test in 2023]