More than $275 billion worth of fixed-rate home loans will switch to variable loans between July and December this year — posing an enormous challenge for banks as property owners seek to renegotiate or organise a change in loan. TSA Group says banks will need to prepare for a deluge of calls, often from property owners struggling with consecutive cash rate increases. This article looks at the empathy and clarity needed from bank CX teams, as well as the value of training call centre personnel to better identify vulnerable customers and those who need financial hardship support. When faced with financial challenges, customers look for an empathetic and knowledgeable voice on the other side of the phone — and regulators look for evidence they have been dealt with fairly.
Swipe for more
When every headline was about the COVID crisis, and no-one knew what the next day or week would bring, millions of Australians made a decision that took at least one challenge off the agenda. They fixed their home loans.
It was the peak of the pandemic, interest rates had fallen, and a three-year home loan could be fixed for close to 2 per cent. And while few people might have secured that ultra-low-level loan, many got close, locking in a three-year rate that was historically generous.
Fast forward to the end of those three years, though, and it’s estimated as many as 800,000 loans worth a remarkable $350 billion will roll over from fixed rates to variable rates this year and early next. These mortgage holders are standing on what has been dubbed the fixed-rate mortgage cliff, and either need to pay much, much more once the fixed rate expires — about an extra $1,000 a month for a $500,000 home — or lobby their lender for a better deal.
Those who fixed their rates later in the pandemic cycle might have a little more time on their side, but there are even more of them.
AMP Capital estimates that instead of the 10-15 per cent of the home loan market that normally relies on fixed rates, by June 2021 some 40 per cent of loans were locked in. In other words, a substantial portion of the millions of Australians with loans either already need to have an urgent word with their bank – or that time is looming.
So let’s think for a moment about what some of those conversations with lenders will look like — and how banks can manage the volume of distressed calls.
For those who already have a mortgage, there a few options.
Perhaps they will feel happy enough to roll over from fixed to variable, and simply pay the difference. More likely, the conversation will be a tougher one, with the borrower pushing for a lower rate than the home loans currently advertised, which can be up to 9.5 per cent — a rate not seen for over a decade.
They will be stressed and fearful. They might become angry and lash out. What the bank does on that call will determine many things; the home loan is just one of them. If the bank contact centre handles a worried homeowner well, it might mean the bank will keep the customer and the customer will keep their home.
A poor customer experience, though, can have the opposite impact.
Already, we have seen new refinancing records hit as borrowers try to switch up their loans, including shopping around providers in the search for a better deal. But as many borrowers will discover, their borrowing capacity under the higher interest rates has been sharply eroded.
Rate City estimates the borrowing capacity of a household on the average wage has fallen $170,000 in just a year. In other words, as much as the borrower might want to refinance with another lender, many will find out they are forcibly stuck.
This is where the quality of the lender’s call centre training comes to the fore.
Firstly, a good bank contact centre should be in touch with their borrowers before the mortgage cliff is reached, giving them time to understand the issue, consider their personal circumstances and look at the family budget.
Next, when a borrower calls, they can take them calmly through the situation, walking them through their options and providing the kind of advice and insight someone in a distressed financial situation needs.
And thirdly, the call centre should be couching these complex, financial discussions with empathy, recognising that most people genuinely want to do the right thing and repay what is owed. It’s important to listen to their stories and understand that few issues are as emotion-charged as believing there is a threat to your home.
A lot will be asked of the contact centre teams supporting Australia’s banks and non-bank lenders in coming months. But the quality of the customer response — proactive, empathetic, clear — will be critical if Australia is to succeed in stepping back from the mortgage rate cliff.
TSA are Australia’s market leading specialists in CX Consultancy and Contact Centre Services. We are passionate about revolutionising the way brands connect with Australians. How? By combining our local expertise with the most sophisticated customer experience technology on earth, and delivering with an expert team of customer service consultants who know exactly how to help brands care for their customers.