More Australians Turn to Mortgage Brokers for a Hand Managing Hikes

An avalanche of rate hikes over the past 18 months has supersized home loan repayments, but savvy homeowners are not panicking. In fact, more mortgage holders than ever before are reaching out to mortgage brokers for expert help.

A recent survey by the Mortgage & Finance Association of Australia (MFAA) shows 95% of mortgage brokers are meeting with homeowners who have never used a broker before… and it is a move that is paying off.

The MFAA reports nine out of ten brokers have successfully secured a rate discount for their clients this year. And more than eight out of ten have helped their clients refinance to a new lender.

If you are struggling with mortgage repayments, you don’t have to go it alone.

How Much Could You Slash from Your Home Loan?

Part of a broker’s service involves contacting your current lender to negotiate a lower rate, but if they don’t come to the party, real savings action can lie in refinancing.

Mozo has done the sums on the savings potential of switching from the average variable rates (6.6% for owner-occupiers and 6.96% for investors) to one of the lowest rates on the market. They have found that homeowners and investors in capital cities across the country who switch to a new lender can slash their repayments on average by $474 per month. That is as much as $5,691 annually.

The lowest rate loan might not be available to you in your situation (we would be happy to check), but it does highlight that there are big savings to be made if you can refinance to a lower rate.

What If You Have a Fixed-Rate Home Loan?

You have probably heard about the ‘mortgage cliff’. It is a term used to describe the financial shock that homeowners can face when their super-low fixed rate comes to an end. And we are not out of the woods (or away from the cliff) just yet.

The Reserve Bank of Australia says around one million borrowers will come off a fixed rate over the next 18 months.

A Finder survey shows more than one in ten people with a fixed rate home loan are in the dark about when their fixed rate will end. That matters because skyrocketing interest rates mean the average mortgage holder farewelling a fixed rate could face a $1,677 hike in their monthly loan repayments.

So, if you are on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it is soon, check what options are available to you.

Why Are More Australians Turning to Mortgage Brokers?

Due to the recent surge in interest rates, many homeowners are seeking the expertise of mortgage brokers to manage their home loan repayments effectively.

What Benefits Can a Mortgage Broker Offer?

Mortgage brokers can negotiate with lenders to secure a lower interest rate for you. They can also assist in refinancing to a new lender, potentially saving you a significant amount on your monthly repayments.

How Much Can I Save by Refinancing?

According to Mozo, switching from the average variable rates to one of the lowest rates on the market can reduce your repayments by an average of $474 per month, which amounts to as much as $5,691 annually.

What Is the ‘Mortgage Cliff’?

The term ‘mortgage cliff’ refers to the financial shock that homeowners may experience when their fixed-rate period ends, especially in a climate of rising interest rates.

How Can I Prepare for the End of My Fixed-Rate Period?

If you have a fixed-rate home loan, it’s crucial to know when your fixed rate will end. You should explore your options well in advance to avoid any sudden increase in your monthly repayments.

Time to Call the Experts

No matter whether you are feeling the pressures of higher rates, thinking of refinancing or unsure of what is happening with your fixed rate it is important to reach out for expert help. Give us a call today for a helping hand with your home loan.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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Rate Hikes – is your lender behind them?

The Reserve Bank (RBA) may have kept the cash rate on hold in August but that has not stopped some lenders from hiking their variable home loan rates. Here is how borrowers are fighting back.

Homeowners may be celebrating two months of the RBA cash rate staying on hold, but Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm. These hikes, known as ‘out-of-cycle rate rises, can fly under the radar.

It is important to keep an eye on what your lender is doing.

Who Is Hiking Rates?

Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate stayed on hold. In some cases, the upticks may be as little as 0.03%, but some lenders have lifted their variable rates by as much as 0.15%.

On a $500,000 loan, that could mean paying an extra $750 each year… and right now every dollar counts.

One in Two Have Changed Their Loan Payments

Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:

35% are reducing extra repayments

29% are stopping extra loan repayments altogether

26% are tapping into redraw or offset funds to help with repayments

22% are refinancing to a lower rate loan

12% are extending their loan term

Other changes involve switching to interest-only repayments as well as more drastic moves such as selling a home or investment property.

Be Warned, Altering Repayment Strategies Can Come at a Cost

While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.

Reducing or stopping extra payments, for example, means you will likely have your home loan longer and then pay more interest.

Likewise, if you tap into redraw or offset funds, you will pay more interest each month.

Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.

What Can You Do?

Those sneaky out-of-cycle rate hikes aren’t just annoying, they can leave you out of pocket while beefing up your lender’s profits. But you don’t just have to wear the cost, the first step is knowing the rate you’re paying.

Check your loan statements or ask us to investigate for you. If you are not happy with the rate, we can help ask your current lender for a discount. And if they don’t come to the party, we can help you weigh up the possible costs of making a switch.

Why Are Lenders Increasing Variable Home Loan Rates?

Despite the RBA keeping the cash rate on hold, some lenders have increased their variable home loan rates. These are known as ‘out-of-cycle rate rises’ and can happen without much public attention.

Which Lenders Have Increased Their Rates Recently?

ANZ, Commonwealth Bank, Macquarie, Easy Street, and Great Southern Bank are among the lenders that have increased their variable home loan rates recently.

How Can These Rate Hikes Affect My Loan Payments?

Even a small increase like 0.15% can add an extra $750 each year on a $500,000 loan. It’s essential to keep an eye on your lender’s actions.

What Strategies Can Help Me Navigate Higher Rates?

Homeowners are using various strategies like reducing extra repayments, stopping extra loan repayments altogether, tapping into redraw or offset funds, and refinancing to a lower rate loan.

Are There Any Long-Term Costs of Altering Repayment Strategies?

Yes, altering repayment strategies like reducing or stopping extra payments can extend the term of your loan and result in paying more interest over the long term.

How Can Zippy Financial Help Me With Rate Hikes?

Zippy Financial can help you understand the rate you’re paying and negotiate with your current lender for a discount. If your lender doesn’t offer a better rate, Zippy Financial can assist you in weighing the costs of switching to a different lender.

We can help you crunch the numbers to reveal which strategy will help you save today – and tomorrow. So, give us a call to find out if your lender is quietly lifting your loan rate and what you can do about it.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Do You Have a High Net Worth and are Too Busy to Save Money?

High net worth borrowers generally earn more than they spend, which is obviously a great thing – but it can also be a double-edged sword.

Why? Because it can impact your ability to get finance.

Find yourself complaining that you never have enough time?

Does your ‘To Do’ list grows every day, but you barely seem to tick things off?

Are you running between work, gym, family and other commitments like a hamster in a wheel?

If any of this sounds familiar, you could benefit from having a broker help you get your finances and loans organised.

Why Do High-Income Earners Need Help to Get a Home Loan?

Borrowers with high incomes can find themselves spending more than they need to because they can afford a home loan.

They don’t need to check how much they’re paying for their internet service or shop for the cheapest groceries because their budget can afford it.

An extra $20 here and $50 there isn’t worth worrying about for you, the way it might be for someone living week-to-week on lower wages.

Where this can cause problems is when you want to apply for finance.

In fact, high-income earners can have a lot more trouble than they thought they would when they try to secure finance.

This is because with a high income comes high disposable expenditure – something banks don’t like at all.

So, What Can You Do About It?

The first step is to work out what you’re spending right now, and if that amount could be considered “too much” in the eyes of the bank.

But What’s “Too Much”?

Here’s the thing: lenders generally assess your spending using Household Expenditure Measure (HEM). This formula gives the lender an amount as a guide that the average person spends…

In your location (the HEM varies depending on the city you live in)

With your family size (it changes based on how many kids you have)

Your income (lenders assume a higher income means higher spending)

By figuring out how much it should cost you to live, the lender can look at your salary and determine how much you’ll have leftover to service the loan.

Lenders assess your spending against the HEM, and if your spending is way higher than the HEM guidelines, it can show up red flags.

Let’s say, for instance, you’re a couple with one child living in Sydney, and you earn $250,000 combined.

The HEM threshold might suggest spending of around $5,000 per month. But your actual spend is $9,000 per month.

The lender might view your spending habits as reckless, as they exceed the HEM by a large margin… and that’s not someone they want to loan hundreds of thousands of dollars to.

This Is Where an Experienced Mortgage Broker Can Help.

We can help you adjust your spending habits, to become a little more lender-friendly.

Don’t worry, you won’t be living on baked beans and toast. But you may need to reign in some of those recurring, non-essential expenses for a few months, so we can help you produce bank statements that reassure your lender you’re a good ‘credit risk’.

We help you restructure your debt.

You might also have large credit card limits thanks to your income, which we may need to reduce. Many people don’t realise, but even if you only owe $100 on a $20,000 card, the lender will assess this card as though it’s fully maxed out – bringing down your borrowing capacity. You can always bump the limit back up again down the track if you need access to more credit.

We help you find the best lender for your specific situation.

Every lender has a different loan policy, criteria and appetite for risk. As experienced mortgage brokers, we can assess your situation and help match you with a lender who will be most likely to approve your loan, as their policies suit your situation.

For every problem, there is a solution, and with our depth of knowledge and experience, we can help you move through these obstacles and become “finance ready”.

Why do high-income earners face challenges in securing finance?

High-income earners often have high disposable incomes, leading to higher spending habits. This can be a red flag for banks, especially if spending significantly exceeds the Household Expenditure Measure (HEM) guidelines.

What is the Household Expenditure Measure (HEM)?

HEM is a benchmark used by lenders to estimate a borrower’s living expenses. It varies based on location, family size, and income, helping lenders determine how much a borrower can afford to repay.

What role does a mortgage broker play for high-income earners?

A mortgage broker can help high-income earners restructure their debts, negotiate with lenders, and find the best loan options that suit their financial situation.

How can high-income earners adjust their spending habits?

They can start by reviewing their monthly expenses, identifying non-essential spending, and cutting back to reduce their overall expenditure.

Can high-income earners still maintain their lifestyle while becoming finance ready?

Yes, the goal is to make strategic spending adjustments without significantly compromising their lifestyle. This can be achieved by cutting back on non-essential expenses and being more mindful of spending patterns.

What long-term benefits do high-income earners gain by becoming finance ready?

Besides improving their chances of loan approval, they can also achieve better financial management, potentially save more money, and enhance their overall financial health.

The bonus is, you’ll probably save quite a bit of money in the process, and our service is 100% free for you, as we’re paid by the lender. Speak to one of our friendly team members and get the ball rolling on your loan application today!

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

More Australians Turn to Mortgage Brokers for a Hand Managing Hikes

How Much Could You Slash from Your Home Loan?

What If You Have a Fixed-Rate Home Loan?

So, if you are on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it is soon, check what options are available to you.

Frequently Asked Questions

Why Are More Australians Turning to Mortgage Brokers?

What Benefits Can a Mortgage Broker Offer?

How Much Can I Save by Refinancing?

What Is the ‘Mortgage Cliff’?

How Can I Prepare for the End of My Fixed-Rate Period?

Time to Call the Experts

RELATED ARTICLES

SERVICE LOCATIONS

Rate Hikes – is your lender behind them?

Who Is Hiking Rates?

One in Two Have Changed Their Loan Payments

Be Warned, Altering Repayment Strategies Can Come at a Cost

What Can You Do?

Frequently Asked Questions

Why Are Lenders Increasing Variable Home Loan Rates?

Which Lenders Have Increased Their Rates Recently?

How Can These Rate Hikes Affect My Loan Payments?

What Strategies Can Help Me Navigate Higher Rates?

Are There Any Long-Term Costs of Altering Repayment Strategies?

How Can Zippy Financial Help Me With Rate Hikes?

RELATED ARTICLES

SERVICE LOCATIONS

Do You Have a High Net Worth and are Too Busy to Save Money?

Why Do High-Income Earners Need Help to Get a Home Loan?

So, What Can You Do About It?

But What’s “Too Much”?

This Is Where an Experienced Mortgage Broker Can Help.

Frequently Asked Questions

Why do high-income earners face challenges in securing finance?

What is the Household Expenditure Measure (HEM)?

What role does a mortgage broker play for high-income earners?

How can high-income earners adjust their spending habits?

Can high-income earners still maintain their lifestyle while becoming finance ready?

What long-term benefits do high-income earners gain by becoming finance ready?

RELATED ARTICLES

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