Predicted date is April 2024, shows research
Fixed rate loans will continue to expire and become higher rates into early 2024 and then decline sharply, according to new research from leading mortgage aggregator Connective.
The research suggests with the volume of refinanced loans falling since July this year, now might be time for brokers to check in with their fixed rate clients and reassess their refinancing options.
Connective’s research shows that in the first quarter of 2024, the number of fixed-rate loans expiring will be, on average, 47% higher than in the same period of 2023.
However, April 2024 is when the fixed rate cliff is predicted to end, with figures rapidly declining across the second half of the year.
Connective: Brokers should reach out to fixed rate clients
Connective executive director Mark Haron (pictured above left) said brokers needed to reach out to both fixed rate clients and clients who had recently come off their fixed rate.
“Clients might’ve rolled from fixed rate into variable and are sitting tight, waiting to see what happens with interest rates,” Haron said. “Or their fixed rate may be due to expire, and they’re unsure about serviceability and fixing again. Either way, there are valuable conversations that brokers can have with clients.”
Haron said sustained interest rate hikes had “made it harder for brokers to find cheaper rates”.
“Serviceability has become more challenging for borrowers making loan mobility harder also.
“The Christmas New Year period is traditionally a time when people are reviewing their finances and getting ready for another year. This is an excellent opportunity for brokers to demonstrate how they can be a partner in this process.”
Both Haron and Connective CEO Glenn Lees provided Connective’s views, backed up by research, on the property and mortgage trends seen over the year in their Industry Update: 2023 End of Year Wrap.
Bank competition for borrowers set to rise in 2024
Haron said competition from banks would only get stronger next year and data-driven client engagement would give brokers a distinct advantage in the marketplace.
“Using a personalised approach to educate clients about their options may provide them with ways to improve their financial position and can help create client loyalty,” he said.
The Connective research also revealed that in 2023, despite higher fixed rate loan expiry rates than in 2022, the volume of refinanced loans peaked in June at 53%, aligning with the conclusion of cashbacks from many lenders, and a trend downward at an average rate of 37.5% per month.
Connective: What will fixed rate borrowers do next year?
According to Haron, there’s been lots of discussion about the fixed rate cliff throughout 2023, but with the end in sight, it’s vital to ensure every client has the correct information relevant to their situation so they can make an informed decision.
“The ability to tailor this information is one of the differences that brokers can offer,” Haron said.
“As we all start thinking about 2024, I encourage every broker to take a moment and consider what your fixed rate clients need to know about their loans … use the answers to shape how you communicate with clients.”
Lees (pictured above right) said despite concern over the impact interest rates were having on borrowers, the current interest rates were “historically not that high … [although] they’re coming off a very low base”.
“Most mortgage stress comes from life events rather than economic circumstance things like illness, loss of income, death, divorce … things that can really affect someone’s earnings,” Lees said.
Earlier this year, Connective research revealed why borrowers choose brokers while last month it shed light on the challenges asset finance brokers face and how they are dealing with current market forces and future demands.
Are you connecting with clients facing the end of their fixed interest rate period? Please comment below.
