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With the threat of another interest rate hike around the corner, brokers are now no strangers to preparing their clients for the inevitable.
Speaking to The Adviser, Home Loan Experts chief executive Alan Hemmings said that most brokers are “now well-prepared” in having conversations with their clients about potential interest rate increases.
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Mr Hemmings said that when brokers are servicing clients with a lender, they’re “already servicing well above where interest rates will be”.
“Where servicing is really tight, there’s always a conversation with the customer about where are they spending their money. It might mean they only [order] Uber Eats one night a week instead of two, or they have to cancel a subscription service,” Mr Hemmings said.
Mr Hemmings further noted that Australians by and large are “very good at repaying their debts”.
“We haven’t seen a huge increase in arrears as of yet, but that’s not to say another rate rise won’t hurt,” Mr Hemmings said.
“However, I don’t think it will be a major factor in people defaulting on loans.”
Rate rise risk
The recent Consumer Price Index (CPI) data released by the Australian Bureau of Statistics (ABS) has prompted many bank economists and commentators to change their predictions for the November monetary policy meeting.
Following the rise of 1.2 per cent in inflation during the September 2023 quarter (up 5.4 per cent annually), the big four banks have landed in agreeance that a hike in interest rates of 0.25 per cent is imminent.
This is despite Reserve Bank of Australia (RBA) governor Michele Bullock’s statements during the Senate economics legislation committee on 26 October, where the governor said that the board was unsure if the CPI data would affect inflation forecasts and monetary policy.
However, this is not to say that all are in agreeance with the mainstream economists.
While Mr Hemmings admitted that the consensus is that borrowers will see another rate rise in November, he believes there is still a chance for a continued hold.
“I think the Reserve Bank of Australia (RBA) has got an opportunity to leave [rates on hold] for another month and just see what is actually happening with inflation because the big driver of inflation at the moment is fuel costs,” he said.
However, Mr Hemmings commented on the RBA’s supposed penchant for lifting interest rates during Melbourne Cup Day.
“I’ve been around long enough to know that they’ve used the Melbourne Cup to hide the news of a rate rise although I think a lot more people are waiting for that first Tuesday of each month now to see what happens,” he said.
[RELATED: Inflation ‘higher than anticipated’: McEwan]
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