Brokers play a vital role as customers feel the pinch

After more than a decade of constrained inflation and record-low interest rates, Australians are now experiencing rapid rises in the cost of living but despite the challenges this brings, property markets are still active and there are opportunities for brokers to build their businesses.

In changing times, customers need more support than ever. More than 70 per cent of customers are turning to mortgage brokers for their home lending needs, according to the Mortgage and Finance Association of Australia.

Brokers who can assist their customers in navigating the evolving economic environment have an opportunity to build stronger, more enduring relationships – which will benefit their businesses in the long term. 

Outlook for the economy

NAB’s Australian Wellbeing Survey for the December quarter of 2022 shows a rising cost of living is weighing on consumers’ minds but, according to NAB Group Economics, inflation appears to have reached a peak at the end of 2022. NAB is forecasting inflation to fall to 4.25% by the end of 2023 and back into the Reserve Bank of Australia’s target band of 2-3% by the end of 2024.

NAB is forecasting the RBA will continue to lift official interest rates in the coming months to 4.1 per cent in May before beginning to cut interest rates from early 2024. 

Strong employment conditions and healthy savings buffers mean most customers will be well placed to manage through this period. NAB’s Consumer Sentiment Survey for quarter four of 2022 shows, many people are also spending more thoughtfully to safeguard their budgets, with four in 10 Australians having cut back on expenses such as coffees, car trips, and entertainment. 

Most existing homeowners are staying ahead of their mortgage repayments but managing a housing loan in a rising interest rate environment is a new experience for many borrowers and many are looking to their brokers for guidance. 

Brokers will also be in high demand from customers who are exiting low-interest fixed-rate mortgages in the coming months. According to Australian Bureau of Statistics data, refinance volumes exceeded $19 billion at the end of 2022, while many customers will roll off fixed rate home loans in the first half of 2023.

Customers who require additional assistance should contact their lender as soon as possible. NAB announced in its First Quarter trading update that it is increasing resources for NAB Assist to help customers deal with rising interest rates and cost of living pressures.

Property market outlook 

Added demand for brokers comes at a time when the property market remains active, but with slowing price growth.

According to CoreLogic’s Monthly Housing Chart Pack for February, annual sales volumes are still 4.6% above the decade average, while home values fell by 7.2% over the 12 months to January following a strong run up in prices through 2020 and 2021. 

Despite slower price growth, higher costs of living have put housing affordability into the spotlight. Housing affordability declined towards the end of 2022, with the proportion of income needed to meet the average loan repayment rising by 3.8 percentage points to 42.4 per cent, according to the Real Estate Institute of Australia (REIA) Housing Affordability Report.

After the ninth consecutive RBA rate rise announced in February, some home buyers are finding their borrowing capacity has reduced compared with the previous year. Would-be home buyers looking to enter the market or upgrade their home are seeking advice from brokers on maximising their borrowing power and find a mortgage that will meet their needs. 

In this dynamic environment, the role of brokers has never been more relevant. Markets are evolving rapidly and brokers have a key role to play in helping customers to navigate the changes.

As the Bank behind the Broker, NAB helps brokers to stay informed of changing market conditions by providing regular updates on the economy, property and lending markets, as well as assistance from its extensive network of experienced BDMs. NAB is constantly reviewing its policies to help brokers and their customers to get the best and most sustainable outcomes from their home lending needs.