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Being able to adapt to changes in personal circumstances is important. This is being demonstrated as the flow-on effects from the post-mining slowdown are being felt in former boomtowns like Perth and many regional areas. Now is an ideal time for brokers to be communicating with clients and help them to take preventative action to protect themselves and their families from any financial shocks.
Brokers – especially those located in South Australia, Western Australia, Queensland and the Northern Territory – with clients in mining and related industries are likely to have a number of clients whose changing circumstances may impact on their immediate and long-term finances. Clients could be returning to capital cities and taking jobs that don’t have the same high salaries they’ve become accustomed to, or they might have only had the house for a few years and therefore don’t have a lot of equity in their property on which to capitalise.
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Some of the fly-in-fly-out clients we see at Fair Go Finance have multiple debts including a mortgage, car loan, credit cards, or loan(s) for boats or jet skis. Prior to the slowdown, these clients didn’t have difficulty servicing these loans but when circumstances change, simplifying their debt structure by consolidating their debt can reduce their financial risk.
The other segment of a broker’s client base that might have been impacted by the slowdown is investors. Many people capitalised on the boom by buying properties in mining towns, but are now stuck with mortgages while property values and rental yields have taken a tumble. They could also have other debt that needs restructuring to help lessen their financial exposure while putting them on the front foot to withstand any future changes.
While one solution does not fit all circumstances, a personal loan, instead of automatically rolling everything into the home loan, could be an option. It’s important to weigh up the cost of interest and fees over a 30-year mortgage versus a seven-year personal loan, and consider if increasing the client’s home loan now will impact their ability to re-mortgage in the future. What’s more, a drop in salary or low housing equity might make some lenders nervous about extending the home loan in the first place.
While the long-term drivers of the Australian economy will fluctuate, these principles are equally as relevant to other changes in personal circumstances such as having children or making a career change. Therefore, staying in touch with your clients and understanding the pressures they might be facing can prove the value of maintaining an ongoing relationship with a broker. It builds trust and goodwill, which results in them coming back or referring friends to you in future while potentially earning you some income in the interim.
