With inflation rising and the cost of living increasing, reviewing a client’s current position with their lender is key, says a Melbourne broker.
Empower Wealth’s head of mortgage broking Ben Magnus (pictured) said the structure of the clients lending needed to be reflective of the current market rates available.
“Reviewing a client’s expenses is also most important,” Magnus said.
“Car loans, personal loans, and credit cards are all charged at higher rates/fees. It is about reducing all of these to allow clients a better way of managing all their lending obligations with a lower rate.”
Read more: RBA lifts official cash rate
Magnus said as a mortgage broker he had the ability to navigate a panel of lenders with multiple offerings to find a better deal for his clients.
“You would be surprised how many clients have subscriptions they do not need or use often enough, or how quickly that $5 coffee a day adds up,” he said.
With the Reserve Bank implementing its first rate rise in over 11 years last week, Magnus said it had not affected the industry yet.
“Fast forward six to eight months, I am sure we will see more of an impact,” he said.
Magnus said statistics showed over $250bn was sitting in offsets, redraw and household savings.
“This money is there to help people navigate the tough times, so with inflation increasing, there is lots of work that needs to be done on a national and global scale,” he said.
“It was only a 0.25-basis point increase coming from a low base, so as brokers I think we need to stay alert but not alarmed.”
Read more: 24 lenders raise interest rates
Magnus said many new homeowners had not experienced an interest rate rise during the life of their loan.
“It’s about being smart with your money and budgeting,” he said. “As long as you haven’t extended your borrowing capacity to buy that property when prices are high, then you should be fine.”
Magnus’ advice to clients experiencing financial difficulty was not to put their head in the sand.
“If you are experiencing financial difficulty, there are many solutions available to extend your loan terms, reduce your payments, and of course sit down with a knowledgeable broker to canvas the market for a better solution,” he said.
Magnus said the latest RBA interest rate rise would not solve the high inflation issue Australia was currently experiencing.
“It will however go towards starting the conversation,” he said. “We are in the middle of a federal election, so we need to cut through the noise around whichever governing political party wins as there are multiple aspects that need to be factored into the economies continue rebuilding post COVID.
“It’s not just about the interest rate. The supply issues, demand issues, COVID restriction rules, are all having an effect.”