Borrowers ‘get creative’ amid economic challenges

Furthermore, the Commonwealth Bank’s latest Household Spending Index for October indicated a shift in spending habits, with a 1 per cent monthly decrease and 2 per cent annual growth.

According to Amy Small, a broker at Small Local Brokers in Newcastle, significant purchases like family vehicles and home renovations are being postponed by many borrowers.

Ms Small predicts a further reduction in the car loan and personal loan industry following the recent rate rise, emphasising the need for clients to be informed and prepared for these financial shifts.

“That big purchases of a family vehicle will wait until after rates settle,” she said.

“I have seen the renovation of homes also reduce from a $150,000 structural renovation to just a $30,000 new deck instead – this change I feel is directly related to how much funds are being set aside for mortgage/loan repayments.”

To assist clients during these challenging times, Ms Small advocates proactive measures, such as biannual reviews, to ensure they are well-positioned amid changing economic landscapes.

“Preparing for these cycles is as important as paying off your loan once you have the home loan,” Ms Small said.

“It’s a painful time and we are assisting by providing a six-monthly review instead so we can make sure the clients are on the best options available for them.”

South Melbourne-based broker Ben Williams at Mortgage Choice echoed this sentiment, emphasising the importance of reaching out to clients before they seek assistance.

In response to the evolving financial landscape, he said borrowers are “getting creative” in their solutions, such as buying property in rural areas, moving in with family or more recently entering into joint property purchases with siblings or friends.

Mr Williams highlighted the popularity of government schemes, like the home guarantees offered by Housing Australia, and innovative lending solutions, including property sharing and debt consolidation.

“Lenders like CBA are using things like property share where you can actually split the loan and you’ve got your own statement and you’ve got your own part of the loan, which is fantastic,” Mr Williams said.

“We’ve had a lot of inquiry about debt consolidation … [and] we’ve done a lot of refinances for people with their car loans, even their tax debt since the indexation went up.”

While there has been a rise in inquiries from first home buyers, both owner-occupiers and investors continue to be the primary groups in borrowing.

“It’s hard to save at the moment, paying so much in rent and trying to save for a house is really hard,” Mr Williams said.

[Related: Rising mortgage costs spark interest in co-sharing]