1 00:00:04,050 --> 00:00:06,990 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:07,320 --> 00:00:10,110 Sean Aylmer: We've now had 10 interest rate rises in a row 3 00:00:10,110 --> 00:00:13,320 Sean Aylmer: and many homeowners are dealing with the reality of mortgage 4 00:00:13,320 --> 00:00:16,860 Sean Aylmer: stress, and that's even before hundreds of thousands of households 5 00:00:16,860 --> 00:00:20,310 Sean Aylmer: roll off fixed- rate mortgages under higher variable rate loans. 6 00:00:20,610 --> 00:00:23,130 Sean Aylmer: I wanted to find out the options for mortgage holders 7 00:00:23,130 --> 00:00:26,700 Sean Aylmer: in this rising rate environment. Graeme Holm is the CEO 8 00:00:26,700 --> 00:00:29,640 Sean Aylmer: of Infinity Group, one of the country's most awarded mortgage 9 00:00:29,640 --> 00:00:31,590 Sean Aylmer: brokers. Graeme, welcome to Fear and Greed. 10 00:00:31,950 --> 00:00:33,090 Graeme Holm: Thanks, Sean. It's a pleasure. 11 00:00:33,570 --> 00:00:35,850 Sean Aylmer: How tough is it out there for people with a 12 00:00:35,850 --> 00:00:38,310 Sean Aylmer: home loan, and particularly for those rolling off those fixed- 13 00:00:38,310 --> 00:00:38,940 Sean Aylmer: rate loans? 14 00:00:39,630 --> 00:00:40,920 Graeme Holm: This is going to be a bit of a two- 15 00:00:40,920 --> 00:00:43,620 Graeme Holm: edged sword and some people will like the answer, some 16 00:00:43,620 --> 00:00:46,979 Graeme Holm: people dislike the answer. But we've got just under $ 10 17 00:00:46,979 --> 00:00:51,810 Graeme Holm: trillion of residential real estate in Australia, but we're only 18 00:00:51,810 --> 00:00:54,150 Graeme Holm: sitting at a couple of trillion dollars, just over $ 2 19 00:00:54,150 --> 00:00:58,620 Graeme Holm: trillion in debt. So the truth therein lies that about 20 00:00:58,620 --> 00:01:01,740 Graeme Holm: 80% of our residential property has no debt in Australia. 21 00:01:02,280 --> 00:01:07,230 Graeme Holm: That being said, the average everyday family is absolutely struggling, Sean. 22 00:01:07,680 --> 00:01:10,590 Sean Aylmer: Okay. When we talk about mortgage stress, how do you 23 00:01:10,590 --> 00:01:15,630 Sean Aylmer: define it and how do we measure it today against 24 00:01:15,660 --> 00:01:18,300 Sean Aylmer: 12 months ago before the rate cycle began? 25 00:01:19,290 --> 00:01:22,500 Graeme Holm: Yeah, so mortgage stress, obviously, I guess defining it when 26 00:01:22,500 --> 00:01:25,830 Graeme Holm: a household's really struggling to make payments, make their bills, 27 00:01:26,370 --> 00:01:28,679 Graeme Holm: typically in the industry, we would say that's when more 28 00:01:28,680 --> 00:01:32,459 Graeme Holm: than 30% of their income is actually going towards loan 29 00:01:32,459 --> 00:01:35,520 Graeme Holm: repayments. Now, not only mortgage stress, we're having that in 30 00:01:35,520 --> 00:01:37,770 Graeme Holm: rental stress right now. We're seeing that across the board 31 00:01:37,770 --> 00:01:40,650 Graeme Holm: for most families, so it's pretty scary. 32 00:01:41,069 --> 00:01:45,390 Sean Aylmer: Yeah, it's really scary. If I'm in that situation, what 33 00:01:45,390 --> 00:01:46,290 Sean Aylmer: do you recommend? 34 00:01:47,160 --> 00:01:49,710 Graeme Holm: Yeah, look, Sean, people hate the B word and I 35 00:01:49,710 --> 00:01:52,950 Graeme Holm: dare don't want to throw it out, but the old budget. 36 00:01:53,280 --> 00:01:56,610 Graeme Holm: People think budget's living in scarcity, but it's actually quite 37 00:01:56,670 --> 00:02:00,420 Graeme Holm: contrarian to be honest. If we actually sit down and say, well, 38 00:02:00,420 --> 00:02:04,770 Graeme Holm: X amount's going to food and groceries and alcohol, et cetera, work 39 00:02:04,770 --> 00:02:08,310 Graeme Holm: out a discretionary spending and actually put a plan in place... 40 00:02:08,460 --> 00:02:10,230 Graeme Holm: We don't jump in the car to drive to work 41 00:02:10,230 --> 00:02:12,570 Graeme Holm: without a route. We know which way we're going and 42 00:02:12,570 --> 00:02:15,510 Graeme Holm: how long it's going to take. It's really critical that 43 00:02:15,510 --> 00:02:18,540 Graeme Holm: people actually sit down, look at what they're spending, where 44 00:02:18,540 --> 00:02:20,549 Graeme Holm: it's going, and actually put a plan in place. 45 00:02:20,910 --> 00:02:23,340 Sean Aylmer: Okay. I've done it different times in my life when 46 00:02:23,340 --> 00:02:26,430 Sean Aylmer: I've found myself under financial stress, be it mortgage stress 47 00:02:26,430 --> 00:02:28,830 Sean Aylmer: or others. I couldn't agree more, because once you actually 48 00:02:28,830 --> 00:02:33,120 Sean Aylmer: sit down and think about where you are spending your money, inevitably, 49 00:02:33,120 --> 00:02:35,400 Sean Aylmer: you find things that you can cut and it also 50 00:02:35,400 --> 00:02:39,660 Sean Aylmer: makes you very cognisant of where you can hold back 51 00:02:39,690 --> 00:02:41,609 Sean Aylmer: energy prices, those sorts of things. 52 00:02:42,240 --> 00:02:45,150 Graeme Holm: Correct, yeah. We can cut costs everywhere. It's not easy 53 00:02:45,150 --> 00:02:46,650 Graeme Holm: for everyone to say, " Oh, look, I'm just going to 54 00:02:46,650 --> 00:02:49,590 Graeme Holm: go and earn more money." But the number one strategy 55 00:02:49,590 --> 00:02:52,470 Graeme Holm: that we tend to find is successful all the time 56 00:02:52,470 --> 00:02:56,100 Graeme Holm: for any family is if they actually look at the 57 00:02:56,100 --> 00:02:59,850 Graeme Holm: correct loan product, Sean. If they can actually actually consider how 58 00:02:59,850 --> 00:03:03,090 Graeme Holm: they earn their income, the frequency of the income, and 59 00:03:03,090 --> 00:03:06,240 Graeme Holm: look at products that allow them to actually overpay or 60 00:03:06,240 --> 00:03:08,850 Graeme Holm: direct all or most of their income to the debt, 61 00:03:09,210 --> 00:03:12,090 Graeme Holm: and that can apply to car loans, home loans, credit cards. 62 00:03:13,020 --> 00:03:15,900 Graeme Holm: Because it's obviously when people understand that interest is being 63 00:03:15,900 --> 00:03:19,050 Graeme Holm: calculated daily, the more they can put it at the debt, 64 00:03:19,410 --> 00:03:22,740 Graeme Holm: the more interest they'll save, i.e. the less they'll pay and 65 00:03:22,740 --> 00:03:26,519 Graeme Holm: the larger the principal reduction. So I suggest to people 66 00:03:26,520 --> 00:03:28,680 Graeme Holm: that they don't actually look for what appears to be 67 00:03:28,680 --> 00:03:31,950 Graeme Holm: the cheapest loan. They should look for the best loan. 68 00:03:33,750 --> 00:03:35,790 Sean Aylmer: Okay. What about the market at the moment? As a mortgage 69 00:03:35,790 --> 00:03:40,440 Sean Aylmer: broker, you would be across many offerings from lenders. We 70 00:03:40,440 --> 00:03:43,830 Sean Aylmer: talk about people rolling off fixed- rate loans and we 71 00:03:43,830 --> 00:03:47,820 Sean Aylmer: certainly subscribe to the view that anyone that's rolling off fixed- 72 00:03:47,820 --> 00:03:51,330 Sean Aylmer: rate loan should shop around. It's their right. Even if 73 00:03:51,330 --> 00:03:53,160 Sean Aylmer: they don't change, they may actually get a better deal 74 00:03:53,160 --> 00:03:57,360 Sean Aylmer: with their current lender. The flip side though, with rates 75 00:03:57,360 --> 00:04:01,950 Sean Aylmer: rising and it seems credit standards perhaps tightening, particularly after 76 00:04:01,950 --> 00:04:03,330 Sean Aylmer: what's been going on in the US in the last 77 00:04:03,330 --> 00:04:06,690 Sean Aylmer: week or so, is it as easy as just finding 78 00:04:06,690 --> 00:04:10,050 Sean Aylmer: another loan or are the banks more demanding? 79 00:04:10,440 --> 00:04:13,890 Graeme Holm: Yeah, this is the thing, Sean. It's become a bit of a chicken- 80 00:04:13,890 --> 00:04:17,370 Graeme Holm: egg scenario. It's actually pretty bloody hard for people. With 81 00:04:17,370 --> 00:04:21,060 Graeme Holm: the 3% servicing buffer at the moment, you've got most 82 00:04:21,060 --> 00:04:23,970 Graeme Holm: lenders sitting in the 5%, some into the 6%, but 83 00:04:24,360 --> 00:04:26,490 Graeme Holm: a banker or broker has to pretend that you are 84 00:04:26,490 --> 00:04:29,760 Graeme Holm: paying an additional 3% buffer on that and that's what 85 00:04:29,760 --> 00:04:33,330 Graeme Holm: has kept the Australian housing market pretty resilient. We've got 86 00:04:33,330 --> 00:04:36,539 Graeme Holm: tight credit policies. But if you are coming off a 87 00:04:36,540 --> 00:04:41,430 Graeme Holm: low fixed- rate now of 1. 99 or 2.29 and entering 5. 88 00:04:41,430 --> 00:04:45,120 Graeme Holm: 99, and they should shop around, Sean, but it's pretty 89 00:04:45,120 --> 00:04:47,160 Graeme Holm: hard when the bank says, " Oh, we're not going to 90 00:04:47,160 --> 00:04:50,160 Graeme Holm: give you a refinance because when we apply the 3% 91 00:04:50,520 --> 00:04:53,339 Graeme Holm: buffer, you couldn't afford the debt you already have." We've 92 00:04:53,339 --> 00:04:55,080 Graeme Holm: had to go and build a product in the last 93 00:04:55,080 --> 00:04:57,029 Graeme Holm: probably three or four weeks for this with a couple 94 00:04:57,029 --> 00:05:00,539 Graeme Holm: of mortgage managers and wholesale lenders that say, " No. I 95 00:05:00,540 --> 00:05:03,210 Graeme Holm: understand that, but if you've shown me that you've consistently 96 00:05:03,510 --> 00:05:05,820 Graeme Holm: not missed a repayment on your home loan for six 97 00:05:05,820 --> 00:05:08,820 Graeme Holm: to 12 months and you're still employed, I don't think 98 00:05:08,820 --> 00:05:11,159 Graeme Holm: I should apply that buffer if I'm only giving you 99 00:05:11,160 --> 00:05:14,310 Graeme Holm: the exact amount of debt you currently have." So in 100 00:05:14,310 --> 00:05:16,650 Graeme Holm: other words, you're going to see some lenders come out 101 00:05:16,650 --> 00:05:19,140 Graeme Holm: in this space that say, " No. We understand you can 102 00:05:19,140 --> 00:05:22,469 Graeme Holm: meet your liabilities. You've not missed a repayment. We do 103 00:05:22,470 --> 00:05:24,060 Graeme Holm: want to give you a better deal and help you 104 00:05:24,060 --> 00:05:27,210 Graeme Holm: out." Whereas the mainstream lenders are really crippled by that APRA 105 00:05:27,570 --> 00:05:28,469 Graeme Holm: 3% buffer. 106 00:05:29,070 --> 00:05:31,050 Sean Aylmer: Stay with me, Graeme. We'll be back in a minute. 107 00:05:37,170 --> 00:05:41,040 Sean Aylmer: My guest this morning is Infinity Chief Executive Officer Graeme Holm. 108 00:05:42,000 --> 00:05:43,589 Sean Aylmer: Until you said that I haven't thought about this. So if 109 00:05:43,589 --> 00:05:45,359 Sean Aylmer: I come off my, I'm fortunate enough to be on 110 00:05:45,360 --> 00:05:48,930 Sean Aylmer: a fixed- rate loan of two point something, 2. 29%, 111 00:05:48,930 --> 00:05:52,919 Sean Aylmer: I think, I've got another 12 months, Graeme, I'm boasting 112 00:05:52,920 --> 00:05:55,890 Sean Aylmer: here on the show, but what if I come off 113 00:05:55,890 --> 00:05:59,520 Sean Aylmer: and I go to a 5% or 6% loan plus 3%, 114 00:06:00,540 --> 00:06:05,700 Sean Aylmer: if I can't afford that as per prudential requirements, what 115 00:06:05,700 --> 00:06:07,260 Sean Aylmer: does a bank do? What does a lender do? 116 00:06:07,830 --> 00:06:10,410 Graeme Holm: This is the scary thing. I get a bit wary 117 00:06:10,410 --> 00:06:12,570 Graeme Holm: of fixed- rate loans because of the hidden fees and 118 00:06:12,570 --> 00:06:15,480 Graeme Holm: charges. If most people with a low fixed- rate loan 119 00:06:15,480 --> 00:06:18,359 Graeme Holm: look at the comparison rate, they're going to roll you 120 00:06:18,360 --> 00:06:22,350 Graeme Holm: out into a very basic, no frills, high- interest rate, 121 00:06:22,350 --> 00:06:25,980 Graeme Holm: standard, variable product, Sean. If you don't meet those lending 122 00:06:25,980 --> 00:06:28,110 Graeme Holm: regulations, you're not going to be able to move. You 123 00:06:28,110 --> 00:06:29,910 Graeme Holm: will have zero choice. 124 00:06:30,270 --> 00:06:30,659 Sean Aylmer: Yeah. 125 00:06:31,140 --> 00:06:34,440 Graeme Holm: It's not so much the cliff for people coming off fixed- 126 00:06:34,440 --> 00:06:36,930 Graeme Holm: rate that everyone should be worried about. It's when they 127 00:06:36,930 --> 00:06:39,930 Graeme Holm: come off fixed not having the best deal with their 128 00:06:39,930 --> 00:06:43,380 Graeme Holm: current lender and not being in a position to negotiate 129 00:06:43,380 --> 00:06:45,000 Graeme Holm: as a consumer or shop around. 130 00:06:45,300 --> 00:06:46,230 Sean Aylmer: That's quite scary. 131 00:06:46,620 --> 00:06:47,490 Graeme Holm: Very scary. 132 00:06:47,880 --> 00:06:52,350 Sean Aylmer: Are lenders doing enough in this area? We hear plenty 133 00:06:52,380 --> 00:06:57,690 Sean Aylmer: from lenders and admittedly, it's often the big banks saying 134 00:06:57,690 --> 00:06:59,760 Sean Aylmer: they're looking after customers. Are they doing enough? 135 00:07:02,130 --> 00:07:06,630 Graeme Holm: Oh, I'll bite my tongue, but look, I would say no. Look, 136 00:07:07,440 --> 00:07:11,370 Graeme Holm: a rising interest rate environment is amazing for banking institutions, 137 00:07:11,370 --> 00:07:14,460 Graeme Holm: and let's be honest, they're making billions in profits. Not 138 00:07:14,520 --> 00:07:18,090 Graeme Holm: half or not one, they're making billions. Look, I don't 139 00:07:18,090 --> 00:07:21,780 Graeme Holm: believe that they are doing enough. There are some non-major-four 140 00:07:22,050 --> 00:07:25,080 Graeme Holm: bank lenders and lending institutions that are coming out and 141 00:07:25,080 --> 00:07:28,230 Graeme Holm: having a crack, and there are those fringe players where 142 00:07:28,230 --> 00:07:31,140 Graeme Holm: the money's coming from the same location, so it's not 143 00:07:31,440 --> 00:07:34,560 Graeme Holm: any riskier, but then they don't have branches, if that 144 00:07:34,560 --> 00:07:37,500 Graeme Holm: makes sense. So I definitely encourage your listeners to shop around, 145 00:07:37,500 --> 00:07:40,739 Graeme Holm: think with their feet, but it is scary that the 146 00:07:40,740 --> 00:07:42,360 Graeme Holm: banks are just going to assume that you're going to 147 00:07:42,360 --> 00:07:45,900 Graeme Holm: roll out, oh, sorry when I apply this 3% buffer. No, 148 00:07:45,960 --> 00:07:48,210 Graeme Holm: you are stuck where you are. I had one last 149 00:07:48,240 --> 00:07:50,850 Graeme Holm: week that if they went to that new lender, they 150 00:07:50,850 --> 00:07:54,300 Graeme Holm: would've come out from 2. 19, they should have come 151 00:07:54,300 --> 00:07:58,140 Graeme Holm: out to 5. 49 and the banks rolled them out 152 00:07:58,140 --> 00:08:01,740 Graeme Holm: at 6. 09 and said, " Oh, well, that's your new 153 00:08:01,740 --> 00:08:03,480 Graeme Holm: product now because you're on a fixed- rate." 154 00:08:04,380 --> 00:08:04,920 Sean Aylmer: Really? 155 00:08:05,100 --> 00:08:05,670 Graeme Holm: Mm- hmm. 156 00:08:05,730 --> 00:08:06,840 Sean Aylmer: And they're allowed to do that? 157 00:08:07,380 --> 00:08:09,210 Graeme Holm: Well, that's the problem with the fixed- rate. If you're 158 00:08:09,210 --> 00:08:12,179 Graeme Holm: taking that initial fixed- rate term, the product that you 159 00:08:12,180 --> 00:08:16,170 Graeme Holm: roll out to is not typically very nice at all. 160 00:08:16,170 --> 00:08:19,560 Graeme Holm: It's usually the standard product. You have to renegotiate with 161 00:08:19,560 --> 00:08:22,830 Graeme Holm: your lenders. You may pay some package fees. You may 162 00:08:22,830 --> 00:08:26,490 Graeme Holm: pay some variation fees. There's always the devil in the 163 00:08:26,490 --> 00:08:28,740 Graeme Holm: detail when you're looking at a fixed- rate loan. 164 00:08:29,100 --> 00:08:31,470 Sean Aylmer: Okay. And for many people, it's not like they can 165 00:08:31,470 --> 00:08:35,910 Sean Aylmer: negotiate otherwise because with that 3% buffer, they're suddenly looking 166 00:08:35,910 --> 00:08:38,880 Sean Aylmer: at a 9% rate, which is very difficult for some 167 00:08:38,880 --> 00:08:39,689 Sean Aylmer: people to afford. 168 00:08:40,230 --> 00:08:44,429 Graeme Holm: Correct. That's pretty scary times. Look, admittedly, money isn't as 169 00:08:44,429 --> 00:08:48,780 Graeme Holm: dear as it was in 2010, '11 before rates started dropping, 170 00:08:49,260 --> 00:08:53,490 Graeme Holm: but applying that serviceability buffer is really hurting everyday families. 171 00:08:54,240 --> 00:08:56,610 Graeme Holm: If you were listening to Philip Lowe when he promised 172 00:08:56,610 --> 00:08:59,099 Graeme Holm: that rates wouldn't increase until 2024,- 173 00:08:59,100 --> 00:08:59,371 Sean Aylmer: I was. 174 00:08:59,371 --> 00:09:03,240 Graeme Holm: ... yeah, and you were any age, not a young, 175 00:09:03,240 --> 00:09:05,460 Graeme Holm: but a young first home buyer or any age and 176 00:09:05,460 --> 00:09:09,300 Graeme Holm: you went out and borrowed 90% or 95% to get 177 00:09:09,300 --> 00:09:11,670 Graeme Holm: your first home and Aussies, as we know, will do 178 00:09:11,730 --> 00:09:14,250 Graeme Holm: anything to get their first home, and all of a 179 00:09:14,250 --> 00:09:16,830 Graeme Holm: sudden, rates have moved every month, month on month on 180 00:09:16,830 --> 00:09:19,320 Graeme Holm: month nearly for the last year, you'd have to be 181 00:09:19,350 --> 00:09:21,840 Graeme Holm: pretty disappointed is the polite way to put it. 182 00:09:22,530 --> 00:09:24,450 Sean Aylmer: I must say I'm a big fan of mortgage brokers 183 00:09:24,450 --> 00:09:27,150 Sean Aylmer: and I have never not used a mortgage broker in 184 00:09:27,150 --> 00:09:31,530 Sean Aylmer: probably the last 20 years, I think, because the moral 185 00:09:31,530 --> 00:09:33,540 Sean Aylmer: for me is that you can go to your mortgage 186 00:09:33,540 --> 00:09:37,230 Sean Aylmer: broker and they have to be independent enough to do 187 00:09:37,230 --> 00:09:40,440 Sean Aylmer: the right thing by you. I think the reason I 188 00:09:40,440 --> 00:09:43,079 Sean Aylmer: like mortgage brokers is that they are a third- party 189 00:09:43,080 --> 00:09:44,580 Sean Aylmer: voice. It's just not me and the lender. 190 00:09:45,540 --> 00:09:48,449 Graeme Holm: Yeah. People do get stuck and I've got a few 191 00:09:48,450 --> 00:09:50,610 Graeme Holm: sayings, but I won't rattle them off to pick on 192 00:09:50,610 --> 00:09:53,429 Graeme Holm: any brands, but it's typically, we end up with school 193 00:09:53,429 --> 00:09:55,290 Graeme Holm: banking as a kid and we end up staying with 194 00:09:55,290 --> 00:09:57,870 Graeme Holm: that bank for the better part of our life. I 195 00:09:57,870 --> 00:10:01,770 Graeme Holm: think it's important that people do subscribe to choice and 196 00:10:01,800 --> 00:10:04,290 Graeme Holm: they vote with their feet, but there's lenders out there 197 00:10:04,290 --> 00:10:08,160 Graeme Holm: or there's policies around lenders and income styles that we 198 00:10:08,160 --> 00:10:11,100 Graeme Holm: just aren't aware of as a consumer. So I definitely 199 00:10:11,100 --> 00:10:13,620 Graeme Holm: suggest people shop around and talk to a really good 200 00:10:13,620 --> 00:10:14,699 Graeme Holm: experience broker. 201 00:10:15,420 --> 00:10:17,309 Sean Aylmer: Graeme, thank you for talking to Fear and Greed. 202 00:10:17,880 --> 00:10:18,599 Graeme Holm: Pleasure. Thank you. 203 00:10:19,020 --> 00:10:22,470 Sean Aylmer: That was Graeme Holm, CEO of Infinity Group. This is 204 00:10:22,470 --> 00:10:24,809 Sean Aylmer: the Fear and Greed Daily Interview. Join us every morning 205 00:10:24,809 --> 00:10:27,179 Sean Aylmer: for the full episode of Fear and Greed, Australia's most 206 00:10:27,179 --> 00:10:30,209 Sean Aylmer: popular business podcast. I'm Sean Aylmer. Enjoy your day.