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You may have seen the term “mortgage prison” banded about recently, as a record number of Australians are expected to have their covid-era fixed interest rate period end, and their loan revert to a shockingly high variable rate.
Many borrowers took advantage of the extremely low interest rates on offer during the initial years of the covid pandemic. Now, a large chunk of those fixed interest rate loans have reverted or are due to revert to a significantly higher standard variable rate in the coming months, meaning a borrower’s repayments will increase drastically.
We sat down with David Pettitt, mortgage broker and branch principal at YBR Caroline Springs, to get an understanding of why there has never been a more important time to engage a mortgage broker, particularly if you’re considering refinancing.
The role of a mortgage broker
The benefits of utilising a mortgage broker have been well documented, and there has been a substantial increase in borrowers turning to a broker in recent years: between July and September 2022, mortgage brokers facilitated over 71% of all new residential home loans.¹
David says that despite the consistent increase in the number of borrowers utilising the often free services of mortgage brokers, there are still borrowers who are missing out on the unique benefits available to them.
“Taking out a home loan and managing that home loan can be a complicated and time-consuming task,” said David. “Borrowers must rely on someone who knows what they’re doing. As mortgage brokers, we spend all day, every day navigating the complex mortgage market. It’s an incredible benefit to the client to be able to access the services of an expert and not have to fork out a cent for a broker’s services.”
“At YBR Home Loans, we have a panel of 40 to 50 lenders that we can sift through to find the best loan for your circumstances. If you were to go directly to a bank or lender, you only have access to their limited products. By not leaning on an expert mortgage broker, you’re simply limiting your options and increasing the amount of work you have to do.”
“A regular mum or dad or even a young person who’s wanting to buy a house, they don’t have the time to go and research all of the various offers out in the mortgage market. As a mortgage broker, we live in this space day-in-day-out. We’re in constant conversations with the different lenders, financial advisors, accountants and real estate agents to ensure that we’re able to place our clients in the best position possible.”
“Banks have all kinds of different policies and there’s just no way that a typical mum and dad borrower or first home purchaser can expect to understand the ins and outs of the thousands of mortgage products, to get an upper hand on the market.”
“A mortgage broker exists to disseminate all of the information about the various products available to a borrower, and to match a client’s needs, expectations and goals with the most suitable product.”
“My role is to put in the time and research to provide a client with three or four options that meet their needs. Then we have a conversation about what suits them.”
“That conversation is not about me telling you what to do, but rather, presenting the options based on my knowledge, expertise, the lender’s policies and unique understanding of your personal situation.”
Why now is the perfect time to contact a mortgage broker
As the official cash rate has increased by a record 3.50% since May of 2022, David said that there has been a shift in client conversations in recent months: “As brokers, we understand that there’s probably a little bit more anxiety around at the moment or a little bit more concern.”
“In the current environment, we’ve obviously had an increase in borrowers looking to refinance. Many homeowners, justifiably, are concerned about interest rates or their repayments. For me, the focus has been on working with a client more holistically, to support them.”
“Coming from an accounting background with over 15 years working across different sectors, I know intimately that clients can greatly benefit from the simple things, such as budgeting. Over the last five or so years, particularly in the COVID phase, many of us haven’t had to be so conservative or protective of our income.”
“I’ve been working with several clients where we’re working to meet their savings targets and the focus is on building a budget. We look at expenses first and the obvious things like electricity bills, fuel, groceries, takeaway…there’s always little things you can do to scrimp and save to help you on your way to a savings target.”
“If you can save $50 a week on a particular item (like takeaway), you’ll be $2600 closer to your savings target by the end of the year. If you do that four times, there’s more than $10,000. Incremental changes mean you don’t have to throw out your entire lifestyle.”
“One of my strengths is sitting down and putting in the time to understand the needs of the client. It’s not just about finding out whether you want to buy a house, it’s figuring out why you’re buying a house. Are you buying it to downsize? Are you buying to upgrade? Are you looking to have kids in the next couple of years?”
“Our focus as brokers is not to get a one-and-done transaction completed. It’s about setting you up for long term success.”
A mortgage broker’s primary focus
Mortgage brokers in Australia get paid when people use their services to help find a loan for buying a house. They look at different products from banks and other lenders and match what is best for the person looking to buy a house. They are usually paid by the lender when the loan is approved. This is to the benefit of borrowers around the country, particularly because, as David explained, “there’s a lot of work that the broker puts in, initially, you’re talking 20 to 40 hours on a deal depending on your circumstances before we even get it to the point where we’re ready to submit it to the bank and then the workload continues after that.”
“My focus is and always has been on being a support network and an advocate for my client’s interest. Naturally, many brokers are going into owning their own business to make an income and look after themselves and their families, but the only way I can do that is by looking after people.”
“It’s about the client and what’s best for you to help you achieve your goals. That’s my complete focus. I’m very much interested in a holistic kind of situation as well, so not just trying to get a bank to lend you money. My approach involves looking at the whole picture, from your regular kind of accounting and financial analysis, to the lending criteria you’re looking for, even moving on into further stages in life like insurance and superannuation.”
“I know that whatever your goals happen to be, my job is to help you get there and provide that service. So, seeing someone go from point A to point Z is really rewarding.”
For those looking to purchase a property or refinance their existing home loan, it is important to explore all of the available options. Mortgage brokers can provide invaluable assistance in understanding the features and benefits of different loans as well as helping you create a budget that will help you reach your financial goals. With so much to consider, make sure you find an experienced broker who is focused on providing genuine support and understands your individual situation. That way, you can be confident that you are making the right decisions for yourself and your family’s future.