Aussies advised to urgently review their mortgages as new challenges hit 2022
- Written by: Tess Sanders Lazarus
Hardworking Aussies are being advised to review their mortgages as soon as possible in preparation for imminent interest rate rises. Leading financial services provider, LendWealth, is warning Aussies that 2022 is likely to bring a number of challenges including increased inflation and potential interest rate rises, and it is important to get ready and be on the front foot.
“A lot of people are of the view that their bank will look after them, but the reality is that they tend to look after new customers and take advantage of the old,” LendWealth general manager, Clem Kian said.
LendWealth is a leading finance provider boasting a team of highly skilled and customer focused brokers. Forging an excellent reputation in the market for service and tailored support, the team at LendWealth prides itself on not only finding the best home loan for its clients, but also sourcing the lowest rate, while taking into consideration the bigger picture of helping them to reduce their debt more quickly and create wealth through investment opportunities.
“Every mortgage should be reviewed regularly, especially this year, with rates moving. If it’s been a while since you’ve reviewed your mortgage, then you need to act now,” Kian said.
“You could be paying more than you should! Also, your financial goals and needs may have changed since you took on your loan. Is it still the best option for you? Will it be the best option if rates rise or you want to purchase an investment property in the changing financial climate of 2022.”
Kian has outlined some key reasons why people need to urgently review their mortgage.
Are you on the best rate
“The reality is that banks move interest rates despite what the Reserve Bank of Australia (RBA) is doing. While the RBA has kept interest rates at record lows many banks have raised their rates,” Kian said.
“When interest rates go up, you want to be on the lowest rate possible to manage and absorb the cost of any rate rise. Undertaking a mortgage review will help you to determine if you are on the best rate, and if not, what better options are available to you so you can act.”
Better offers
“As I have already said, many banks and financial institutions are driven by volume, volume in the number of mortgages they write and volume in the value of lending they provide,” Kian explained.
“To increase mortgage numbers they offer incentive deals to woo customers from other banks over to their services.
“Introductory offers can mean significant discounts for new customers for one year or longer. For a mortgage of $500,000 plus, this can mean thousands of dollars in savings.
“There is nothing wrong with shopping around when you do a review, in fact, this is when you realise just how important it is to put your own mortgage provider under a bit of pressure to meet the market or lose your business.”
Fixed rates versus flexible rates
“Many people like to lock in part or all of their mortgage in preparation for rate rises so they can immunise themselves against some of the financial impact,” Kian emphasised.
“While this can be a good strategy depending on your situation, it can also lock you into the lender for the period of the fixed term. To get out of the arrangement or the relationship will cost you money in penalties.
“These issues should be addressed as part of your review. Different lenders have different rules. Why not check the market to see who is offering the best rate with the best terms. Often it isn’t the big name banks, it is the smaller more nimble lenders that have unique products of advantage in the market.
“If you can’t compete on size, then you compete on benefits and some of the smaller lenders are good at this.”
Which lender is more likely to support you
“This is a question that many people find strange, yet it is one of the most relevant questions to ask in the face of a market with rising interest rates,” Kian added.
“While no one can predict how a bank or lender will behave, some lenders definitely have a better reputation for wanting to retain customers and therefore, bend over backwards to assist them.
“Some lenders don’t always pass on full interest rate hikes. Others tend to negotiate on official rates depending on how much business you have with them.
“When undertaking a review of your mortgage in preparation for rising interest rates, think about which lender may offer you the better relationship moving forward.”
Find a good broker – the ‘ICE CREAM Principle’
“Find yourself a good broker. A good broker will not only be able to develop a clear picture of your financial situation and options, but they will do all the hard work for you and know about all the latest products available in the market,” Kian explained.
“Just think of the ICE CREAM Principle – if you feel like ice cream, you don’t go to one shop to buy vanilla and then to another to buy chocolate and then across town to get strawberry. You want to go to an ice cream shop that will give you all the best flavours in the freshest cone for the best price under one roof.
“Brokers are always worth their weight in gold, but they become even more relevant during periods of economic and financial uncertainty. A good broker will cut through the market noise and focus on the key issues that need to be addressed. This is the type of person you need in your corner when the economy is facing uncertainty.”
About LendWealth
LendWealth is a leading financial services provider based in Norwest, Sydney. With a team of over ten mortgage brokers and executives available to assist clients realise their dreams of owning their own homes or finding investment opportunities, the company has become specialists at finding the right home loan for each client. The company provides expert insights, as well as a range of services including loans, refinancing and property investment finance.
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