COLUMNS • SALES & MARKETING
How to handle anxious clients Advisers need to discuss rate increases with clients, says Paul Watkins.
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TMM 03 • 2021
T
he worst market research is anecdotal, but recent conversations with friends highlighted an issue with mortgages which I am sure you are more than aware of. A home-owning couple I know in their mid-thirties have a large mortgage but are terrified of what will happen a couple of years from now. They can make the payments perfectly well now as they both earn well, but they want to start a family. Giving up one income for a short time has already been factored into their finances. However, they know that interest rates and therefore repayment rates will go up in the not-too-distant future, which is quite a concern to them. Another couple are first home buyers and have accumulated a healthy deposit. They told me they are stunned at how much they can borrow at current rates, which has allowed them to look at higher priced homes. The mortgage broker they have dealt with has cautioned them on this and has done some modelling to show the impact of a rate rise. This now has them in the dilemma of, “should we just go for it and see what happens?” or, “let’s assume the rate rise will happen and act accordingly”. The third couple are about to renovate as “money is so cheap”. Adding to their mortgage, they are adding a pool, deck, Archgola, new fences and a new kitchen. Six-figure additions. Are they right to do so?
‘We all know interest rates are at an all-time low, but we also know that they can’t stay this way’ I can imagine that such conversations are going on in large numbers of households right now. Even at the higher end, say a $1 million mortgage, which of course is quite common in Auckland, if rates jump by say 2%, that could mean an extra $1,000 or more a month in repayments. We all know interest rates are at an all-time low, but we also know that they can’t stay this way. Is it causing any notable concern among your clients? Or are they quietly hoping that it will all be fine and they will easily cope when rates rise? Press headlines right now are contradictory. “Rates predicted to rise early next year”; “Government wants to see rates hold until the economy stabilises after Covid” and similar. The banks have differing opinions on when rates will rise. How should you approach this issue with clients? The key here is to keep in touch and offer ideas on how to cope with the rate
