Mortgage and finance brokers who approach fixed rate customers armed with more data about their finances could be key to helping them avoid significant mortgage stress as they navigate to a new loan or rate, says MogoPlus CEO Mike Page.
Following the launch of a new Mortgage Stress Predictor tool for lenders, aggregators and brokers that uses data to predict future customer mortgage stress, Page (pictured above left) said brokers would be able to achieve a new level of accuracy and understanding when it came to their customers’ household finances.
“There is so much noise around the fixed rate cliff, but it has been very difficult to predict the impact on a household’s real financial position, which is impacted by changes to different liabilities or payments, including things like cost of living increases and slower wage increases,” Page said.
“The accuracy of data and the predictability we have now is really closing that gap. We can now see an accurate net monthly position of a household, and see if that will be positive or negative over a period of up to 12 months, which brokers can then present back to their customers.”
The MogoPlus tool uses data analytics to provide insights at the individual customer level, rather than the usual portfolio level. It shows how the future ability of customers to service their mortgage will be impacted by data points like higher interest rates or the latest data around inflation.
Plugging into actual customer data through channels like open banking, Page said brokers could now draw on accurate income and expense behaviour to deliver predictive insights before a refinancing event. This could help them flag vulnerable fixed rate customers earlier to support broker outreach.
“If I’m a household coming towards the fixed rate cliff there might be behaviours in the data, like I’ve stopped paying my utility bills or my credit card every month,” he said. “There are indicators that could show a customer is heading towards a vulnerable position, that can then be reported and flagged.”
“Brokers can work with customers to look at alternative paths from a fixed rate to a variable rate or look at refinancing options. It gives an accurate, clear and unbiased position of each household’s real financial position, based on real transaction data rather than customer-declared data.”
This would provide brokers with a proxy for affordability of other loans, Page said, because the data could be used to predict the impact of different rates and loan payments on a household budget, informing the broker on how refinance options or actions would really impact the customer.
Page said brokers would need to proactively approach customers with the Mortgage Stress Predictor and, with the customer’s consent, could work with them on seeing what the next step is from a loan perspective, which could also support brokers in meeting obligations such as the Best Interests Duty.
“Often the customer doesn’t know the real impact of what is around the corner,” Page said. “The broker is adding value by being able to present accurate data and a high level of predictability.”
The RBA has estimated about 800,000 fixed rate mortgages representing loan liabilities of $500 billion are due to be refinanced in 2023. Many brokers have already been actively contacting their fixed rate customers to both educate them about their options.
A survey commissioned by Mortgage Choice and released in February found that, among Australians with home loans, 71% of borrowers who had at least some of their loan on a fixed rate were concerned about coming off that rate, and 55% were already feeling financially stressed.
Additionally, NAB’s recent Financial Hardship report found that four in 10 Australians were facing some form of financial difficulty, which was the highest since the pandemic began, and one in three Australians had identified money as a significant cause of stress in their lives.
Women in Credit Risk Australia founder Sacha Close (pictured above right) said that often customers didn’t know when their loan interest rates were due to expire, and that with so many factors involved, they couldn’t predict how increased mortgage rates and inflation costs would impact their budget.
“Many households are already facing financial stress and are focused on keeping their heads above water,” Close said.
“It is almost impossible for most customers to predict the new repayments and this can catch them off-guard. As banking industry leaders, we are responsible for supporting our vulnerable customers in understanding the impacts as far in advance as possible, so they can begin to change their behaviours and to plan.”
