Louisa Sanghera

Yesterday’s cash rate decision will decimate homebuyer and investor activity, which has already fallen off a cliff since May last year, according to one of the nation’s most awarded mortgage brokers. The Reserve Bank of Australia decided to increase the cash rate by 25 basis points to 4.35 per cent at its meeting this afternoon.

Zippy Financial Director and Principal Broker Louisa Sanghera said the decision did not make sense given the steadily decreasing inflation over the past nine months as well as the significant and prolonged fall in homebuyer and investor activity over the same period.

According to the ABS Lending Indicators for September, the number of new loans for owner occupiers have fallen 28 per cent since May last year, while the number of new investor loans have fallen 25 per cent over the same period.

“Many of the new or existing borrowers we speak with have absolutely no chance of refinancing, with a lot of them technically not servicing their current debt levels,” she said.

“Over the past two months in particular, borrowers are becoming more desperate with many homeowners turning to interest-only repayments as the only way they can continue to hold on to their homes. “Unfortunately, their current lenders don’t necessarily offer interest only to owner occupiers – and they can’t refinance – so they may need to sell or opt for a repayment pause to keep the roof over their heads.”

Ms Sanghera called on all levels of government to start showing some fiscal constraint rather than expecting everyday borrowers to shoulder the inflation burden.

“Fiscal restraint can help fight inflation rather than just increasing interest rates in a record short timeframe,” she said.

“The wealthy with no mortgages are currently not being affected by rates rises – apart from seeing their term deposits growth in value significantly – and they are the ones with high discretionary spending, whilst your mum and dads out there working hard are the ones who are suffering financially.”

Ms Sanghera said borrowers appeared to already be in survival mode and have cut back on expenses and essentials as much as possible. “Investors are also doing it very tough – especially those whose five-year interest-only mortgage terms might be expiring,” Ms Sanghera said. “Again, most can’t refinance nor can they afford principal and interest repayments, and many lenders no longer offer the option of rolling over in to another interest-only term, which leaves investors with very little option but to sell, which will put further pressure on the rental crisis.”

Ms Sanghera said the underwhelming volume of new homebuyer and investor loans would ultimately impact the rental market and push rents upwards. “If policymakers are serious about helping to alleviate the rental crisis, then they need to allow more lenders to offer rollover interest-only loans to existing investor borrowers so they can continue to provide rental housing to tenants around the nation,” she said. “Without it, more investment properties will be sold off at a time when new investor activity is also well below par.”

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Louisa Sanghera

With hundreds of thousands of fixed-rate home loans still to expire in the next year, existing borrowers can use five key strategies to help secure the best home loan rates, according to one of the nation’s most awarded mortgage brokers. 

Another 40 per cent of fixed-rate loans outstanding in early 2022 will expire by the end of 2023 and a further 20 per cent by the end of 2024. This equated to 590,000 loan facilities in 2022, 880,000 in 2023 and 450,000 in 2024, according to the Reserve Bank of Australia.

Zippy Financial Director and Principal Broker Louisa Sanghera said the bulk of fixed-rate loans are expiring in the second half of this year, with many existing borrowers having to renegotiate with their current lenders because they are unable to refinance.

“The rapid increase in interest rates since May last year means many existing borrowers are stuck with their current lenders, because they simply don’t qualify to refinance elsewhere at present,” Ms Sanghera said.

“However, that doesn’t mean that borrowers need to just accept any old ‘offer’ from their lender or – worse still – simply allow their home loans to roll over to the advertised variable rates.

“Rather, by being proactive and undertaking some simple research, existing borrowers can give themselves a better chance of securing a much better home loan rate.”

5 home loan negotiation strategies  

1. Find the best rate on offer

Ms Sanghera said borrowers should research the best home loan rates currently on offer in the market and use this research as leverage with their current lenders. “Find the best rate in the market then take that rate to your bank and ask them to beat it,” she said.

2. Speak to the retention team

Ms Sanghera said borrowers often make the mistake of talking to the wrong people when renegotiating their home loans. “Always ask for the bank’s retention team directly as they have the best rates, rather than someone who may just be in the home loan call centre,” she said.

3. Don’t give up  

Ms Sanghera said too many borrowers are passive when it comes to their home loans when they should be proactive whenever possible. “If the rate they offer you is still underwhelming, don’t give up, and repeat the same process every six months,” she said.   

4. Name drop your LVR

Ms Sanghera said many existing borrowers have built up significant equity in their homes over recent years, which they can use to their advantage in negotiations. “Lower loan-to-value ratios, or LVRs, do carry lower rates with lenders. So, if your property has gone up in value, you may qualify for a cheaper rate, so make sure you know your current LVR before calling,” she said.  

5. Ask for fee waiver  

Ms Sanghera said that sometimes banks simply won’t offer a lower rate, but there are still ways for borrowers to save money. “If they say they can’t lower the rate, then ask if they can waive the annual fee instead,” she said.  

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Louisa Sanghera

Borrowers have increasingly been exploiting a lending loophole and going cashback mortgage shopping over the past year, according to one of Australia’s most awarded mortgage brokers.

Zippy Financial Director and Principal Broker Louisa Sanghera said an increasing number of borrowers are refinancing every three to six months to qualify for cashback payments of thousands of dollars from lenders.

“These ‘cashback shoppers’ are exploiting a loophole that only requires them to stay with a particular lender for three or six months to keep the cash,” Ms Sanghera said.

“They are even congregating online and swapping hints and tips on how to secure new cashback deals every few months by using and abusing the services of mortgage brokers.

“They do not care about the fact that brokers spend considerable time and money on their refinance applications and will wind up with no commission whatsoever from the loan if the borrower does not stay for a minimum of a year.

“In fact, we make a loss, as it costs us $2,500 as a minimum to prepare each mortgage refinance application.”

NAB and CBA recently axed their cashback deals without providing an explanation as to why, according to media reports.

Ms Sanghera said cashback shoppers were sending some mortgage brokers to the wall because of the requirement to pay back loan commissions if the borrower refinances within the first year of the new loan.

“We are just being inundated with clawbacks because of these hordes of cashback shoppers,” she said.

“The issue has ramped up over the past year in particular and seems to be growing worse every day with online cashback groups feeding off each other.

“They seem to be very proud that they have found this loophole that they can exploit and just don’t care about how this is financially decimating many mortgage brokers.

“People need to remember we are small businesses making little profit. We are not big banks making millions. We are mums and dads trying to pay our own mortgages ourselves.”

Ms Sanghera said cashbacks have been unpopular with mortgage brokers since their inception a few years ago, because they often overshadowed the fact that the loan terms and conditions were sometimes not up to par.

“Unfortunately, for some borrowers, the offer of supposedly ‘free’ money via cashbacks has resulted in them sometimes signing up to loans that are not the best fit for purpose over the life of their property loan,” she said.

“Now we have a plague of cashback shoppers who are wasting our time, and costing us money, because all they care about is getting their hands on some extra cash – regardless of who they have to use to do it.”

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Louisa Sanghera

Low-income borrowers may still struggle to qualify for finance if using a two per cent deposit housing affordability scheme, according to one of the nation’s most awarded mortgage brokers.

2021 Australian Mortgage Awards Independent Broker of the Year and Zippy Financial Director and Principal Broker Louisa Sanghera said the incoming Labor Government’s proposed Help To Buy scheme aims to provide an equity contribution of up to 40 per cent for eligible low to middle-income homebuyers, with only a two per cent deposit saving seemingly required.

However, she said existing schemes that only require a two per cent deposit have proved to mostly be unsuccessful for prospective lower income homeowners.

“While the Help To Buy scheme is commendable, borrowers attempting to tap into existing policies that reportedly only require a two per cent deposit, such as the Family Home Guarantee for single parents, have still not been able to secure finance in our experience because of their lower incomes,” Ms Sanghera said.

“However, the outcome for first-time homebuyers with a five per cent deposit, using the First Home Loan Deposit Scheme for example, has been the opposite with about 90 per cent of borrowers securing finance through our team.”

Even with an equity stake of up to 40 per cent by the incoming government, borrowers still need to qualify for finance for the remainder of the mortgage using the Help To Buy scheme, which was difficult given they must also be low- to middle income earners to qualify for the program, Ms Sanghera said.

“In my experience, saving a two per cent deposit won’t be enough for most low- to middle-income borrowers to secure finance, especially when their mortgage might still be $650,000 after the government’s equity stake, depending on their location,” she said.

Ms Sanghera said borrowers wanting to apply for the Help To Buy program should try to save more funds to put towards their deposits as well as reduce credit card limits and debts to improve their chances of qualifying for a mortgage.

“It’s vital that they also seek expert advice on where and what might be the best property for them to purchase, given they will be required to pay back the government’s equity stake, including capital growth, at some point,” Ms Sanghera said. “

While the Help To Buy program is admirable, I am concerned about a borrower’s ability to upgrade from a unit to a house, or even from a smaller property to a bigger one, in the future if they have to repay hundreds of thousands of dollars in equity and value uplift while also earning a modest income.

“Location and asset selection is always paramount, but it is even more vital when fundamentally they will have to relinquish a significant percentage of equity and value gain if they sell in the future, which may actually prevent them from upgrading at all.”

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