Brokers save clients thousands through repricing

Director at Grand Ocean Financial Services, Terrence Sum, said he had been able to save borrowers on average between 0.46–1.06 per cent.

In some cases, he had saved customers around 0.15–0.4 per cent “by simply submitting a repricing” to their existing bank.

“I always start off with a reprice with their current bank to understand what the bank is happy to offer before I seek alternatives for the customer,” Mr Sum said.

“With many borrowers suffering from the heavy reduction in loan serviceability, regularly reviewing their rates with their existing banks would really help with their cash flow and to also strengthen the relationship.”

Franchise owner at Nectar Mortgages, Justine McDonald, added that she had “never done more repricing requests” in her life.

But given around two-thirds of fixed rates are set to expire in the second half of the year, according to the central bank, she’d also been “proactively writing” to her customers on fixed rate loans to inform them what their mortgage repayments might look like around the corner.

“I’m not trying to scare them but want their family to have the opportunity, well in advance, to consider their position and suggest a review of their household budget,” she said.

“If they are having any concerns around financial hardship once their fixed rate comes to an end, I’m urging them to speak to me early.”

This followed the historic move the RBA made in November 2020, bringing the cash rate to the ultra-low of 0.1 per cent to help ease the pressures from the pandemic. Back then, fixed rates were at around a low of 1.95 per cent and today they sit closer to 6 per cent.

“Assuming all fixed-rate loans roll onto variable mortgage rates and new variable rates are broadly informed by current market pricing, estimates suggest that around half of fixed-rate loans (by number) would face an increase in repayments of at least 40 per cent,” the RBA deputy governor Michele Bullock had previously warned.

“Borrowers with fixed-rate loans that are due to expire by the end of 2023 would experience a median increase of around $650 (or 45 per cent) in their monthly repayments.”

For borrowers on split loans, Ms McDonald had been trying to push current lenders to improve the clients’ variable rate.

“I’m then checking updated LVR’s, through looking at updated property values, to see if they fit a new, lower LVR band before processing pricing requests,” Ms McDonald said.

Reprices save borrowers up to $3k on average

Repricing and refinancing fintech Sherlok said given the rising rates, repricing continues to save borrowers thousands.

“Repricing continues to generate annual savings of $2,000–3,000 on average with the higher reprice savings being over $10,000,” founder and chief executive Adam Grocke said.

“The highest recent result being around $16,000 in annual savings.”

In addition, data in the few weeks of 2023 showed “lenders are more aggressive with repricing” offering rates from 4 per cent, saving customers over 1 per cent in many cases, he said.

“The broker market is now more educated on repricing before refinancing so there has been a natural uplift in the number of reprices being processed,” Mr Grocke said.

As client retention becomes more critical at a time with high refinances, Mr Grocke expects reprices will triple this year.

“Client churn for brokers will increase from the industry average of 15 per cent (MFAA source) to as high as 30 per cent for brokers not proactively servicing their existing client by repricing,” Mr Grocke said.

“Keeping clients on competitive interest rates still remains the #1 reducer of churn.

“Our research also shows that the clients aren’t aware they can reprice their loan and the majority of clients don’t go to the original broker to discuss refinancing. So [brokers] need to stay close to their clients in 2023.”

While some borrowers have managed to save through repricing, others are looking to refinance as their fixed-rate mortgage terms expire later this year.

According to the latest Australian Bureau of Statistics (ABS) lending data, external refinancing value jumped 8.2 per cent to a record high of $19.5 billion for total housing.

Missed the boat on fixed-rate loans

As the majority of borrowers look for ways to save on their mortgage repayments, very few are choosing to fix rates today.

Broker Ajay Kathpal at A4 Finance Group said 95 per cent of his clients were choosing variable rates as they missed the boat and some remain fixated on fixed rates.

“The 5 per cent who are still taking up fix rate mortgages are the borrowers who cannot stand uncertainty, who would rather pay a higher repayment and have peace of my mind that the repayments are not going to change,” Mr Kathpal said.

“The past three to four months, I have been reaching out to every single customer rolling over fixed rates in 2023, giving them a heads up to build a savings buffer for the big jump in repayments.”

Aussie franchisee Sandra Sanches in Epping said the rising rate environment has led to a slowdown in new borrowers and uptick in banks tempting customers to switch.

“Banks are scrambling to tempt potential customers away from their current banks with cash incentives [and] rebates,” Ms Sanches said.

For her clients coming off fixed rates, most were exploring the cheapest option opting for variable rather than fixing again.

“Affordability is taking priority over potential stability of repayment,” Ms Sanches said.

Adjusting monthly expenses and cutting down on spending was the best many people could do to avoid hardship, she said.

Brokers play key role ahead of fixed-rate cliff

General manager of mortgages and commercial lending at Pepper Money, Barry Saoud, added that brokers can reduce borrower anxiety by explaining how the rate increases will specifically impact their day-to-day cash flow.

“More so than ever, brokers play a critical role in educating and shaping the mindset of borrowers and providing meaningful guidance,” Mr Saoud said.

“As many successful brokers understand, a loan is not just about a rate — it’s ultimately about a solution that works for the customer.

“What was considered ‘bankable’ 12 months ago is increasingly shifting into the non-bank space. It’s important that we encourage borrowers to have the confidence to seek out and consider their options when looking for a home loan.”

[Related: All time high November housing refinancing hits 19.5%: ABS]