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Wave Money has announced they will provide relief measures for fixed-rate borrowers facing the looming mortgage cliff.
The Reserve Bank of Australia (RBA) brought the official cash rate up for the 10th consecutive time on Tuesday (7 March 2023) from 3.35 per cent to 3.6 per cent, which has prompted non-bank lender Wave Money to help prepare borrowers for the impending fixed-rate cliff.
The non-bank lender is offering a 2.5 per cent interest rate buffer only to the facility being sought out and no interest rate buffer on any of existing loans for its clients, instead of the standard 3 per cent interest rate buffer.
Wave Money managing director and founder, John Flavell, stated that the non-bank lender understands that borrowers need more than just lower interest rates in order to navigate this turbulent economic environment.
“The fixed rate cliff is a significant challenge for many borrowers, and we recognise the need for direct relief to ease the cash flow pressure they will be feeling,” Mr Flavell said.
“We believe that providing borrowers with the flexibility to move to or stay on interest-only repayments can provide the greatest relief for those facing significant increases.”
According to Mr Flavell, over $370 billion of mortgages are coming off fixed rates in 2023, with many borrowers bracing themselves for repayment increases ranging from a minimum increase of 48 per cent to up to 291 per cent per month.
The fixed-rate mortgages sat at an average rate of around 1.94 per cent when the official cash rate was at historical lows of 0.1 per cent during the pandemic.
With the major banks and many economists predicting the cash rate will now hit a terminal cash rate of 4.1 per cent by May 2023, borrowers with maturing fixed rates are expected to sit around 6.5 per cent with monthly repayments rises by more than 72 per cent per month, according to the non-bank lender.
“Our approach to lending is focused on supporting brokers and their clients and we are committed to providing the flexibility and support they need to navigate this challenging environment,” Mr Flavell further stated.
Fixed-rate mortgagors seeking brokers
A survey commissioned by Mortgage Choice and conducted by Honeycomb Strategy collected responses from 1,000 Australian home loan customers that found that 71 per cent have reached out to brokers to secure better deals.
The survey also found that brokers’ clients were more likely to have a fixed rate or a split loan (48 per cent compared to 40 per cent).
Mortgage Choice chief executive Anthony Waldron said the research showed that home loan repayments are already the biggest monthly expense for 80 per cent of people and 55 per cent were already feeling financially stretched.
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“Financial stress is already an issue, and each interest rate rise exacerbates the problem further,” Mr Waldron said.
[RELATED: One-third fixed-rate clients seek broker]
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