RFS customers (like the broader community) sit in one of 2 camps.
The 1st camp:- Around 70%. For this vast majority they borrowed at a time when rates were higher. As rates have moved downward clients have to request to reduce their repayments as the Banks don't do this automatically. Most clients opt not to act on this which is a practice we think is sound. It provides a buffer for times like this & on the basis no hardship is experienced it means you can pay your loan off earlier. This effectively means that most clients have been paying higher repayments than they need to.
Depending on your own circumstances this could mean your lender won't require an adjustment to repayments.
ANZ Bank has confirmed today (5th May 2022) that 70% of their entire loan book sits in this camp with no change to repayments necessary at this time. We think this reflects the market in general.
The 2nd camp:- Around 30%. These borrowers don't have the buffer that the 1st camp do. This is because they either borrowed recently/ Or have elected to action a request to reduce repayments as rates have come down. These borrowers will be impacted.
On a standard loan size of $500,000 a 0.25% increase = $1,250 per annum in extra interest. Broken down further this equates to $48 per fortnight.
In recent years all loans have been assessed by the lenders at what is called a sensitised rate, often 3% above the current variable rate. This means that most household incomes should be able to meet smaller increased rate costs through careful budgeting.
The larger question is how much will rates rise by? Very difficult to answer this at present, however if you have any concerns please contact us to discuss.