Fixed-rate roll-offs to double each month to December: Connective

After examining its loan book, Connective has revealed that the number of fixed-rate loans expiring will more than double every month between May to December 2023 (based on a year-on-year comparison).

On average, it said, volumes will increase 105 per cent per month over the remainder of the calendar year.

The largest jump will occur in August, with a 133 per cent increase in fixed-rate expiries.

In total, approximately $82.8 billion of fixed-rate loans written by Connective brokers will roll off their fixed terms between June and December 2023.

However, Connective has warned that thousands more Australian borrowers will continue to come off their fixed terms in the first quarter of 2024.

Indeed, the aggregator has found that there will be around a 70 per cent increase in fixed-rate loan expiries in January 2024 (comparing year on year) and an average of 45 per cent increase each month from January to March.

The aggregator has said that brokers will therefore need to be prepared to sustain client value through this extended period, suggesting the fixed-rate challenge was a ‘marathon, not a sprint’.

Connective executive director Mark Haron elaborated: “The fixed rate cliff has been talked about a lot, we know brokers are already working through it with clients. But our data tells us the peak is still coming … it isn’t just a blip in the lending market, the fixed rate ‘cliff’ will extend beyond 2023 for a lot of borrowers and there is an opportunity for brokers to engage.

“The sustained interest rate hikes we’ve experienced mean it’s harder than ever for brokers to find ‘cheaper’ rates for clients and loan mobility is becoming increasingly challenging for borrowers with changes to serviceability tests since they originally borrowed.

“Brokers have to ensure they are adding value that is deeper than finding the best rate. The key for brokers is timing; connecting with clients at the right time before their fixed rate expires can demonstrate knowledge, value, and alignment with their needs.

“Of course, borrowers want low rates, but they also want brokers to help them understand their loan options and they want products with benefits that align with their personal financial goals and lifestyle, such as an offset option with multiple accounts or redraw facilities.”

Connective is encouraging its brokers to have a proactive communication plan for clients who may soon be rolling off their fixed-rate terms.

The aggregator has also now rolled out dashboards in its Analytics App to help brokers identify how many clients have a fixed-rate term expiring in the next 12 months — breaking down the data by month, lender and client and providing the broker with details such as loan balance, rate, and expiry date.

Mr Haron said: “Brokers need to be connecting with clients to discuss refinancing before the banks or competitors are reaching out — and we’re making it as easy as possible for them to do so by providing the right data and tools to trigger proactive communication.

“We’ve seen our brokers rally to support their clients through incredibly complex and tough situations many times before and cement their role as a trusted adviser.

“The fixed-rate cliff that will continue for months is an opportunity for brokers to double down on demonstrating value to clients through proactive marketing, education, and consultation.”

[Related: How brokers are helping borrowers navigate the fixed-rate cliff]