You may have heard that the Reserve Bank of Australia (RBA) recently increased the national cash rate for the first time in 11 years. Find out how this may affect brokers and what you can do to support your clients.
How has the cash rate changed?
In response to inflation reaching 5.1%, the RBA increased the cash rate from 0.1% to 0.35%. This is the first time it has increased since November 2010. The increase means that an owner-occupier with a $500,000 debt and 25 years left on their mortgage may see an increase in repayments of about $65 a month. However, the Governor of the RBA, Philip Lowe, cautioned that this will most likely be the first of many increases in the cash rate.
How will this affect your clients?
With more increases on the horizon, it’s important for brokers to understand how these changes will impact their clients. If the average Australian home loan of $561,992 were to rise by just 1%, monthly repayments would increase by approximately $300. In a 2021 survey by the Finance Brokers Association of Australia (FBAA), 56% of people said that if interest rates were to rise, they would need to look at refinancing their home. During this time of increased cost of living, high inflation rates and growing interest rates on mortgages, clients may find themselves facing financial hardship.
What brokers can do to help their clients?
For many Australians, an increase in their mortgage repayments may be very difficult to handle. The Managing Director of the FBAA mentioned that, “We may see rate rises each month to the end of the year somewhere between 15-25bps each step and this will bring forward mortgage stress and financial hardship for many.”
Now is the time to reach out to your clients to provide support and help them prepare for the upcoming changes. Clients that are unable to meet the increased repayments may need to consider refinancing. If your client is on a fixed rate loan, it’s important to reach out to them at least 4-6 weeks before their term expires to help them review their mortgage and discuss any changes to their repayments.
How can UDA help brokers and their clients?
If your client is experiencing financial hardship, with debts totalling $10,000 or more on top of their mortgage, UDA may be able to help. We can contact their creditors and negotiate to reduce their debts, freeze fees and set up a more affordable payment plan. With less total debts they may be able to reduce their other repayments in order to adjust to the increased repayments on their mortgage. It may also improve their LVR which will help if they are looking to refinance their home loan. If you have a client that would benefit from a reduced debt load, fill out the form below or reach out to our team to find out how we can help.