Majority of borrowers can’t handle another rate rise: Canstar

Canstar’s research found that the 12 cash rate rises had added more than $1,217 to the monthly repayments of a $500,000 loan over 30 years.

A further 8 per cent of mortgage holders told Canstar’s survey they were stressed and already struggling to keep up with their loan repayments.

Despite the Reserve Bank of Australia’s (RBA) cash rate pause on Tuesday (3 October), NAB is forecasting for another 25-bp rate rise by December before any rate relief from cuts might be felt.

Canstar’s group executive of financial services and chief spokesperson Steve Mickenbecker stated: “With two-thirds of borrowers saying they won’t be okay if there is another rate rise there is good cause for community-wide concern, with lenders, government and borrowers likely to share the pain.

“Many borrowers feel they are on a cliff and will nervously await the Reserve Bank’s November cash rate decision, fearing that another rate rise will tip them over the edge. If the September quarter inflation figure due to be released in late October shows a lack of progress towards 3 per cent, the Reserve Bank may be left with little option but to increase the cash rate.

“Borrowers who are already stressed are likely to find themselves excluded from refinancing into a lower interest rate loan because of the higher risk their loan now presents.”

‘Everyone’s feeling the pinch’

Speaking to The Adviser, broker director and founder at Innovative Home Loans, Lee Rosenfeld, said while Canstar’s results were interesting, “everyone’s feeling the pinch”.

Mr Rosenfeld commented: “I don’t think if a rate rise came out next month, then all of the sudden it would change someone’s way they look at it, or they’ve got to move or they’ve got to sell straight away, because we’ve had a couple of months of reprieve.”

He added that while there had been a refinancing peak, more customers were remaining with their existing lender given the repeal of many cashback offers.

“What we’re seeing more is, yes, everyone’s looking for the cheapest rate, which is totally understandable, but banks are getting better at matching and holding clients,” Mr Rosenfeld said.

“Without cashbacks, 5 basis points or 10 basis points cheaper somewhere else isn’t really enough for a client to move because after refinance costs there’s not too much left in the bank, so we’re finding a lot more people are just staying put compared to when there were the cashbacks on offer.”

For those borrowers and clients struggling with their repayments and unsure how they will manage if another rate rise occurs, Mr Rosenfeld said it was important that they “don’t leave it too late”.

He said: “We review our database constantly about their current [rate] and making sure their rate is competitive, and if not speaking to that lender again and getting that as competitive as possible.

“Anyone who are struggling it’s just talking honestly about it from a human level.

“My advice [has] always been – through the whole year – don’t leave it too late. If it is a point where you need to sell, don’t leave it until the last minute where you’ve absolutely on dire straits and you’ve got to get rid of it tomorrow.

“Give yourself time so you can still get out of it.”

Jess Wallis-Hinde, a mortgage broker at Property before Prada, told The Adviser that the rising cash rate impact was only just starting to be seen: “I think the real effects of the consistent rate rises are only appearing now, as people have a chance to breathe and regroup.”

Ms Wallis-Hinde added that she was seeing an increase in the number of people looking to refinance or “shopping around to save money on their home loan”, saying this was making up the “majority” of her workload.

She said to help those 69 per cent of mortgage holders who “won’t cope with another rate rise”, her brokerage was looking at providing financial resources along with constant home loan checks.

“Along with consistent home loan reviews and pricing discounts for our current clients, providing referrals to other sources (financial planners, Moneysmart etc) to find ways to save in other areas of their financial lives,” Ms Wallis-Hinde concluded.

“A majority of my clients use Instagram and Facebook as their main source of research & knowledge, so directing them to platforms developed and run by other financial experts is one way [I] can add value to my clients without refinancing their mortgage.”

[Related: Mortgagors ‘not out of the woods yet’, CEO warns]