Given the challenges facing borrowers, we wanted to know what brokers were doing to help their clients navigate the challenging environment.

Here’s what they had to say...

Contacting customers

I’ve been proactively writing to all my customers who are currently on a fixed rate to reconfirm the low fixed rate and period they locked in for and what that repayment is when it will expire. I acknowledge the very different interest rate environment we are now in and that, as a result of that, when their fixed period expires, things will be very different.

I set out what repayments will look like and explain I’m not trying to scare them but want their family to have the opportunity, well in advance, to consider their position and suggest a review of their household budget and some attempt to start putting away the extra now so that they are used to that higher amount by the time it comes around.

I’m also looking at reaching out to some of the real estate offices I have relationships with to offer a free pricing review to all their landlord clients who may be feeling the pinch at the moment.

Justine McDonald, Nectar Mortgages

Extending loan terms

Most people have made changes; accepted that spending behaviour needed to change, re-evaluated cash flow, cut back on expenses, and explored options to boost income. Still, many are finding that they are no longer in a positive cash flow despite efforts.

There are several things that can be suggested such as offering distressed borrowers extended loan terms or temporarily reverting to interest-only repayments, but these are short-term “fixes” that will end up costing more in the long run.

Consolidation of debt when possible is something else to consider in addition to negotiating rates. This may help some, but it’s proving not to be enough for others. If potential hardship is evident, individuals may need to contact lenders’ financial hardship team and call the National Debt Helpline on 1800 007 007, which is a government-funded service that connects people to free financial counselling.

Sandra Sanches, Aussie

Renegotiating rates

Continued rate rises are expected in 2023 and depending on the borrowers’ situation, I am looking into refinances, refixing, or split-loan options. Some are considering a split loan, where part of the loan has a variable rate and the other part is fixed. That said, not all lenders allow you to refix all or part of your loan.

One of the worst things a borrower can do when rolling off a fixed-rate loan is to simply accept the variable rate the lender automatically provides. Lenders are more likely to offer attractive rates to new customers, not their existing ones ... known as “loyalty tax”.

Before the client’s fixed-rate contract ends, I talk to the lender and let them know the client’s options. Some lenders will provide an offer the clients find acceptable; if they want to fix or do a split loan, then I will explore refinancing options.

Angelo Benedetti, Oracle Lending Solutions

Covering all options

As customers roll off their fixed rates and experience variable products upwards from 5 per cent, it is our responsibility to help the clients understand that the rates they will be experiencing ongoing will potentially become their ‘new normal’. We also offer assistance by renegotiating new rates with their current lenders or new lenders and review their budget by removing or reducing some items, when needed.

In some cases, we are discussing their options to convert their loans to interest-only if they require a short-term financial reprieve to get them through a year or so with reduced payments without facing the need for financial hardship. Finally, we’ve also discussed what downsizing would look like, in which case, we assist the clients in running the sale/purchase costs. Following long discussions, the clients feel calmer and at ease knowing they have options and may not be as heavily impacted as they thought.

Deslie Taylor. Mortgage Choice (Ormeau)

[Related: The fixed-rate cliff arrives]