A recent survey has revealed that 85 per cent of brokers believe there are more out-of-cycle rate hikes in the pipeline, which will create challenges for existing mortgage holders.Online mortgage marketplace HashChing undertook a survey recently, which found that the majority of brokers see further out-of-cycle rate increases on the horizon.
The survey’s results come after a series of lenders have lifted their home loan rates over the past couple of weeks.
The big four moved first, with Commonwealth Bank the last of the majors to announce changes when it revealed on Friday (24 March) that it would be increasing interest-only investment home loans by 26 basis points.
Other lenders have since followed suit, with a range of non-bank lenders and specialist lenders alike moving to increase rates, particularly for investment lending.
Commenting on the findings of the survey, former CEO of the MFAA and current chief operating officer of HashChing Siobhan Hayden emphasised that brokers believe these rate increases are likely to continue.
She highlighted that for consumers, the impact of this trend continuing is that they will potentially be paying more than they need to.
As these challenges arise for existing mortgage holders, brokers are uniquely positioned to help their clients, Ms Hayden told The Adviser.
“Rather than have customers set and forget their loan, they can engage with brokers to understand their current position, and whether there are better offerings for them in the market,” she explained.
She highlighted the value that brokers can bring to consumers, particularly in such an environment, “Consumers that don’t understand our sector may look at their first priority as being the interest rate. [For example,] when a customer starts talking to a broker on a Tuesday of the week but wants to go to auction on a Saturday, suddenly the turnaround time for pre-approval is far more important than whether you get a 3.7 or 3.8 per cent interest rate.
“There are so many more variables that come into play, and that’s that value that brokers provide.”
Rate hikes will drive borrowers to smaller lenders, brokers say
Of the brokers surveyed by HashChing, 97 per cent believe that the out-of-cycle rate increases will drive borrowers to smaller lenders and non-bank lenders.
“I think there’s a couple of reasons for this,” Ms Hayden said. “In the retail space, consumers will obviously work with lenders that have a bricks and mortar location, which tends to be your majors. So, someone like Suncorp out of Queensland doesn’t have a strong footprint in all the other states, but the brokers provide that distribution for them, same with ING, and the Bank of Melbourne outside of Melbourne, etc.
“So, all the second-tier lenders, all the non-majors are ones where brokers provide a significant benefit in relation to distribution. So, when it comes to brokers assisting their customers, it’s a really good time to understand whether they’re an owner-occupier or investment customer, and then looking at what the current rates are available, and from our survey, brokers are interpreting that the second-tier lenders may be a stronger fit for customers at this current point.”
Further, the survey found that 77 per cent of brokers believe that smaller lenders will continue to offer rates below 4 per cent for owner-occupiers, but almost 93 per cent don’t believe smaller lenders will do the same for investors.
In light of this, Ms Hayden told The Adviser that brokers should be supporting their investor clients by looking at the full market available.
“[They can] better communicate to customers the current cap on investment lending, which is being applied through APRA. It’s a current market condition which is pushing interest rates up in that space, so it’s about engaging customers on that matter,” she elaborated.
Ms Hayden added that the current interest rate environment, along with tighter lending standards from APRA and ASIC, presents an important time for brokers to look at providing their existing customers with detailed communication about current market changes and re-engage with them.
“[Brokers] have a CRM and a full database of customers that they’ve worked with. They often do post-settlement engagement, including newsletters and RBA alerts, interpreting information of the current loans that they have with customers.
“Brokers should target communication to those customers that may be investor or owner occupied, particularly if the rate that they’re currently on are high, and look at what they’re currently doing and how they can better assist them,” she concluded.
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