CFML Loans explains how it can provide solutions
CFML Loans leaders said the broader New Zealand economy is starting to feel the bite from interest rate hikes, and in this uncertain economic environment, advisers continued to do their part in assisting those struggling financially.
“We’re starting to see signs of inflation coming down a little bit more. It’s a bit of wait and see, but my view is that it feels like we’re around the top of the interest rate cycle,” CEO Patrick Middleton (pictured above left) said.
In a predominantly fixed-rate mortgage market, Middleton noted that only 50-60% of borrowers have shifted from their low fixed rates to much higher rates, which means there’s still more pain to come for those whose fixed rates are yet to expire.
COO Johny Kale (pictured above right) said mortgage holders might shift from interest rates of around 2% to rates as high as 7% or more.
How advisers are helping
Middleton said CFML Loans has encountered loan applications where advisers “are now really needing to assist clients with cash flow management.”
This could mean assessing higher mortgage payments, car loans, and payday loans while aiding clients in consolidating their debts.
“Advisers are definitely very important in that process,” Middleton said.
He said CFML Loans’ customers with floating interest rates have had to “ride out” the cash rate hikes, while some self-employed customers have had cash flow difficulties due to delayed payments from their clients.
Middleton said it’s great when clients take proactive steps to deal with changing circumstances, and the non-bank lender strives to support them by providing options such as interest-only loans.
He noted very little visible mortgage stress among CFML customers.
Where advisers can truly make a difference is with those clients who “bury their heads in the sand and deny they’ve got an issue,” by offering them solutions. This matter also intersects with discharges.
“The discharges we’re seeing now is probably a 50/50 split going to the bank or actually selling their properties,” Kale said. “Some investor clients have got to a stage where they have gone, ‘OK, I’ve looked across my portfolio and I’m looking to sell’.”
Middleton said changes to interest deductibility rules have resulted in some property investors being confronted with tax liabilities, prompting them to consider whether to sell their investments.
Some of these investors have held onto their properties for extended periods, Kale said, and while values have come back a bit recently, overall, they have done well and could be well-positioned to sell.
Both Middelton and Kale believe brighter times are right around the corner, especially with a change in government and propsed changes to tax non-deductibility rules.
"The general feedback from the advisers is that they are starting to see some green shoots and a little bit more volume coming through, not necessarily purchasing and settling but definitely a lot more enquiries," said Kale.
To get a more comprehensive picture of the current market and the opportunities for advisers, read CFML Loans' exclusive feature in NZ Adviser.
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