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CBA revealed during the week that only 34% of their home loan application flow has come from the broker channel in the last three months. At a time when use of a broker by borrowers has never been more profound, why such low numbers for Australia’s biggest bank?
Only a few short years ago, CBA was the go to lender for brokers due to a combination of keen interest rates, and more importantly at the time, market leading turn around times on applications.
Since then, other lenders have invested heavily in improving their system and processes so they can now match CBA’s turn around times, and whilst their interest rates are still competitive, they aren’t as attractive as they once were relative to others.
These factors, in addition to CBA taking somewhat of an anti-broker stance in recent times, have resulted in brokers like us looking elsewhere. Some might suggest that CBA should stop biting the hand that once fed it so richly!
In this week’s newsletter, we revisit the much talked about ‘mortgage cliff’ brought on by interest rate rises. Whilst it has been very real for many, it hasn’t wreaked the havoc that most people predicted.
Last year, there was widespread concern that borrowers transitioning from low, fixed-rate mortgages to much higher rates would struggle to manage the increased financial burden, potentially leading to a surge in distressed property sales. However, the feared “cliff” appears to have been navigated with minimal disruption. The anticipated wave of distressed selling has not materialised, and the risk now seems to have lessened significantly.
Australians are increasingly channeling any extra cash into offset and redraw accounts, easing concerns that homeowners facing mortgage affordability issues might be forced to sell their homes.
At the height of the pandemic, Australians amassed a substantial savings buffer, which peaked at around $220 billion. However, this has gradually decreased to about $80 billion by March of this year. Interestingly, the savings within offset and redraw accounts have continued to grow, suggesting that homeowners are prioritising the stability of their mortgage repayments amidst rising interest rates.
Many homeowners, already ahead on their mortgage repayments, are making conscious efforts to preserve these savings, adjusting their spending patterns as a first response to financial pressures.
The resilience of the savings held in offset and redraw accounts is seen as a positive indicator for financial stability. These funds provide a vital cushion for households, allowing them to weather financial difficulties without defaulting on their mortgage repayments. Despite a general reduction in other types of savings, this buffer has helped many Australians manage the rising cost of living without resorting to drastic measures like selling their homes.
However, this stability is not universal. While some borrowers are comfortably ahead on their mortgage payments, a significant proportion are feeling the strain. Many are depleting other savings, cutting back on discretionary spending, and postponing major financial decisions in response to the high-interest environment. This cautious approach is evident in various aspects of daily life, with reduced patronage in cafes, swimming classes, and gyms, reflecting the broader impact on household budgets.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
