As 2023 approaches, two industry experts in the financial services sector have predicted that economic growth will decelerate as people spend less due to rising interest rates.
Anja Pannek, Chief Executive Officer of the MFAA, and Adelaide Timbrell, Senior Economist at ANZ, recently discussed the potential outcomes of the current climate in an online webinar for MFAA members, entitled “Riding the Fixed Rate Wave – Preparing Your Customers for 2023”.
The session, which was hosted by Naveen Ahluwalia, MFAA Head of Policy and Legal, covered the outlook for the year ahead, the effects of a hike in interest rates on variable and fixed-rate mortgages, and what brokers need to do to assist their customers.
The Reserve Bank has increased the official cash rate by 25 basis points to 3.10%, the highest it has been in a decade. Pannek and Timbrell noted that this could lead to less money being circulated in the economy and more borrowers experiencing mortgage stress as a greater portion of their income is used to pay back their loans.
The ANZ economist then went on to explain that the economic growth would be slow and unemployment low, although inflation would be higher than usual. This unfortunate combination of circumstances would make it even more difficult for customers with mortgages to stay afloat.
Furthermore, Timbrell said that she anticipated the housing market to decline by a further 10% in 2023.
Pannek concluded the session by advising brokers to stay close to their customers and to demonstrate their value by helping clients understand the costs of switching lenders.
The following key points were highlighted as a way to assist clients rolling off fixed-rate mortgages:
- Reach out to customers in advance
- Help clients understand the true costs of switching
- Understand the roll-off rates when a client’s fixed-rate loan expires
- See if there is an opportunity to talk to a client’s incumbent lender
- Highlight to clients the turnaround times for loans to be discharged
- Encourage clients to reach out as early as possible for help (where required).
Pannek also highlighted the fact that 71.7% of mortgage lending in Australia is facilitated by mortgage brokers, which is the first time it has exceeded the 70% mark. She expressed her admiration for brokers’ commitment to supporting their clients and helping them to navigate the complex lending market.
In summation, brokers and clients can expect to see the economy continue to slow down, housing remains down, and unemployment stays low, with wages likely to increase but not keep up with the cost of living. It would be wise for those with fixed-rate mortgages to be prepared for the transition.
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Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.