How to beat rising interest rates in Australia

Hello and welcome to the Property and Lending Show hosted by Kyrillos Mansour (KM), Fadi Youssef and Mark Kilada

This podcast episode is brought to you by First Brick Property Buyers Agency and Powerloans 

This week we discussed the RBA interest rate increases and how you can beat them!

If you would like to get in contact with KM, Mark or Fadi, you can find them here:
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Fadi@powerloans.com.au

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Transcript

KM: Hello and welcome to another episode on the Property and Lending Show. Joined, as always with me, Ferdy and Mark from Powergones, outside their new office building in Madrid or Central Station or something. How are you, gentlemen?

Fadi: Good, pretty good. I'm in Europe.

KM: Where are you, Mark?

Mark: Yeah, London.

KM: London powerland is gone global. They're too big for Sydney. For Sydney, 30. Mark, we got a big episode today. New IBA rates have come out yesterday, first Tuesday or February 1 update of the year. So we'll get into that, we'll find out what it means in terms of retail rates, what does it mean for everyday people, and a few tips on saving money, et cetera. And I think Fedi wants to have like a ten minute monologue rent, so we'll get to him a bit later. But before we get into it, Mark's Tip of the Week is back and I'm very excited to hear Mark Tip of the Week.

Mark: I'm actually just opening it up, so give me a second.

Fadi: I guess what I want to do is all, before we start, would bring up someone that's been now been in a book, someone's been named in a book and bring that up about the free book you're also giving away. It's been offered in a book as well. So why don't you give us a bit of a three minute rundown and where can we get this book? And can Mark and I get it for free?

KM: Usually I'm the host and I don't get asked questions. No, I know Mark feels every time I ask him how he's reached me.

Fadi: But that's a crazy achievement. So tell us a bit about it.

KM: Yeah, we have a chapter dedicated in a book called how to Invest in Property Stories from Successful Property Investors, which is really cool, to be honest. It was a very cool process, being part of writing a book. I always wanted to write a book and then after writing a chapter, I realized that I never want to write a book because it was very difficult. Not going to lie there's a lot of hours, but, yeah, it's a cool book. There's a lot of really successful property investors that contributed to this book from Australia and around the world. It was published in the UK, so it's not specific to Australia, but the principles from these guys across different countries are applicable here as well. So if you go to first brief social page, Instagram, LinkedIn, Facebook, whatever, and you go into our bio, there's a link tree there where you can find a link to purchase the book. Otherwise we are doing a giveaway as well. By the time this podcast is released, actually, they'll be done, but if anyone is after a book, they could just message us and we can sort it out for them. I'll give you a free book, fairly, and depending on Mark's Tip of the Week, we'll see if we can figure out two free books. What's your tip of the week?

Mark: Obviously, with the rates going up so quickly, anyone that has a mortgage has to sell the Pins. So obviously the tip of the week will be about how to sort of minimize your rate for your repayments. For an existing mortgage holder, it's no secret that new customers always get the best sort of deals. You get the cash back offer, you get the most competitive rates, and existing customers, sometimes they get left behind. Some banks are very good at retaining customers. Very good. Some banks are atrocious so every bank has their own sort of way to maximize the discount that your bank will give you to retain you as a customer. So definitely give Fed to your eye, of course, so we can guide you through that. I had a customer called me the other day with one of the big four who was on 5.85, told him exactly what team to call, gave him the number, what to say, whatever. They dropped it to 5.19 with one phone call. It's like zero point 69 or something with literally just a phone call. I don't know how busy everyone is, but I'm sure you have five minutes. That would save you hundreds of dollars a month. And just to give you an idea about how important it is, especially if you're coming off a fixed rate, there's about 23% of Australia that are coming off fixed rates this year. Can't remember how many billions of dollars of loans, but it's crazy. So a lot of people will be in this predicament where your fixed rate is going from like 2% to 5%, the increase on your repayments. So if it's a 700K loan, your repayments will increase by $1,170. If the 1.4 mill loan, you'll go up by $2,340. So very important to contact us so we can direct you as to how to minimize your rate with your lender. This is not like a full application. You don't actually ever sign anything. A lot of our customers that we have on our books that we reprice, a lot of the time, they actually aren't aware until it's done at a customer with Macquarie that I reprice them and they got a text from Macquarie after they got a discount and they called me saying, oh, I didn't ask for anything. What is this? And I'm like, oh, yeah, I sort of negotiated with them, got you a discount, without them even being aware. So our customers always look after and we sort of make sure they're always on competitive rates. They don't need to sign anything, they don't need to do anything. We do it for them and it's applied to their account from the next month. So definitely contact us because your bank will have a very specific process on how to maximize that discount.

Fadi: Jessica, if I could add something to that as well, something that the banks don't want customers to know either. Even if you're the current lender, and that current lender at the moment has a cash back offer, if you fight them, if you'd be like, no, I'm going to move across, sending to your retention team, whatever it may be. In most scenarios, Mark and I have actually had customers that had it. They'll give them some sort of a cash back to stay as well, not only just matching the rate but also getting that cash back.

Mark: I actually got that with my but it's obviously like another process. So with my bank I did it. They gave me a two grand cash back to be retained. I didn't have to sign anything, nothing. And they paid that to me if I stayed with them for another six months. Every bank is slightly different. They'll offer you something.

Fadi: Yeah.

KM: Amazing. I have an insider source at CBA, I can't say more than that or else they get in trouble. But they mentioned that this month they have 25,000 loans going from a fixed tool variable just this month alone. So a lot of people are there that's going to impact. So definitely excellent. Tip of the week. You surprised me. Every time you get a book now.

Mark: Before you finish, before your fixed rate expires, three months before, give us a call because if we end up needing to refinance because that's more suited to your needs and objective is a better offering for you. It does sort of take time by time to get your documents and meet with you and all that stuff. So better to be prepared.

KM: Beautiful. Okay, we'll shift over to the topic of the week and what we're talking about. So the Reserve Bank of Australia Governor Philip Lowe yesterday announced that the official interest rate has gone up again to 3.35%, which is the current cash rate target and the current inflation rate is 7.8% at the moment. So on the up as well, 30. What does this mean for banks? What does it mean in terms of retail rates? What does it mean for people with mortgages?

Fadi: It means it's going to get a little bit more harder before it gets a lot more easier or at least a lot more better. The upsetting thing about this, and I know Mark and I and yourself have brought this up mini probably every single episode, is that during the COVID period, I think a lot of people kind of banked on the promise of the RBA or the banks weren't going to increase rates for a minimum of 2024. But obviously from what we can see here, they started increasing rates at the end of 2022. Around October, November, we start seeing more increases, more higher increases as well. And unfortunately people that are pretty much banking that they were hoping to make a higher salary by then better be put in a better position probably on investment. Probably that rental coming, is incoming coming as well and for rates to be actually be a little bit more stabilized. That's what we're going to be finding where we're kind of running into a war because it's pretty upsetting to say by people that have borrowed or maximized themselves during the COVID period has actually pretty much max themselves out and are no longer able to borrow since 30% to 40% of people's borrowings actually dropped in that time as well. Now, just to give a rough, I think we discussed this double week is on the podcast, is that with the buffer rate, we already know that let's say Mark or Km can borrow at the 4% or the 5% these days, but we're seeing a settlement rate for the buffer rate now going up to above 10%. For most banks, it's pretty much one banks want to know, are you guys able to borrow that amount that you guys going to take at the eight, nine or 10%? Just called the assessment rate. Now, the worrying thing is, is that we're going to have to keep up with every single master borrowing going down, going down. So I think the biggest advantage is if you are looking now to purchasing a home or if you are looking for refinance. It really is all about timing now. The sooner you get in, the better. Because if you are approved on today's rate, that rate at least, what is it, three to six months? Mark they get to hold on to that rate, the pricing rate, once you submit it, three months. Or if you're waiting to submit or waiting for a better time, your borrowing capacity is going down on a monthly basis now.

Mark: And actually about that, not all banks actually even hold your rate of your pre approval. So with some banks, even if you're approved for 600 grand or whatever it may be, and if that was your maximum next month on the rate scarf, your borrowing has gone down even though you're pre approved. So you need to reassess every single month to make sure. That's why we always put our pre approved our customers with preapprovals with banks that will lock in the rate. Because even if the interest rate is 0.1% more, even if they don't have range, whatever, even if it's not the customers, the end of the story is the best for the customer to be locked in with your rate now while the environment is increasing every month. So we've always preferred to go to a bank that's going to lock it in. We don't need to worry about it. So that way there's no surprises when you buy a property, especially if there's an option, there'll be a disaster if your rate is not locked in.

Fadi: Again, we go back to price of Coburn. Does anyone say a little bit of a guessing game on it? Anyone know what the rate was? Or you guys are probably known back then what the average rate was for.

KM: A fixed rate prior to COVID what year was covered? I don't remember. 2021.5%?

Fadi: No price occupied. What was the rate?

KM: Well, in 2012 was when it was last 3.5%.

Fadi: Yeah.

KM: And then before that was four. Four and a half. Last time it was, you know, at its peak at seven was GFC. So, yeah, it was hovering around the four and a half 4.75% for a long time, since 2010, pretty much 20, 12, 13.

Fadi: Yeah, so that's what we're saying. For example, I was locking customers in for a three year fixed rate of 3.75 for an own occupied property, which was an unbelievable rate at the time. And you're right, the average interest rate is around the 4.5%, between 4.2 to 4.5%.

KM: That's the bank's rate. That's the official rate. Sorry, not the bank rate.

Fadi: Oh, the official rate. Yeah, that was the bank rate. So that's the rate that we're looking customers looking to borrow at, for example. Now, what worries us is what's the main question that all of us are going to ask these days? Do you reckon there's going to be any more raises? If you ask me, I reckon there is, because if we just learn from history you just discussed eight, nine in the 2012, it's going to get a lot worse before it gets better, in my opinion. I still see rates going up or increasing. I was having this conversation with my this morning with the RBA coming out yesterday, that the rates I've seen going up to at least June, July on a monthly basis. We've already seen most lenders actually put forward the whole point 25%. The RBI has gone up with Eugene, but Mark, from most of the emails that we've been getting today, most of them are passing that point 25%, the full increase. And one lender in particular, obviously not going to name any lenders increased their rate by zero point 44. So here's another thing is all the customers need to be aware of, no matter if the RBA increased the rate, whether this by the point 25 or the .5 or 75, it really comes down to what the bank really feels like that morning. If they've had a great morning, if they've had a bad morning, wherever it may be, they're actually in control of increasing those rates. So when they actually throw back at customers and say, oh, we're only trying to keep up with inflation, or we're trying to only keep up with the RBA cash rate, whatever it may be, no, the bank are actually in control in regards to actually passing those sort of increases across to their customers.

KM: Yeah. Governor, for the blowing, his statement pretty much did say there will be more increases. He did actually just say there will be more the next few months, there's going to be more until inflation starts to come down, which they are expecting from memory in his statement for that to start occurring mid year, then throughout to 24, 25 to come down to about three and a half percent. So right now we're at 7.8, pretty much 8%. So there is definitely more interest rates coming, interest rate hikes coming before it goes down. What's interesting though, I mean, I always like to look at it from a, from a housing perspective and what does it mean in terms of the market and what does history tell us. And we always tell people because the number one question I get as a buyer's agent, is this the right time to buy? And my answer never changes. My answer is always the right time to buy is when you can afford it. And we'll get into the money saving and the other side too. But just really quickly, I thought I mentioned so when we look at the interest rates, from 2010 to 14, interest rates were between 4% 4.75 by 2014, 2.5. From 2015 is when it started to drop a little bit. And we look at housing market growth between 2010 and 2014, there was no real growth. It was very stagnant, but straight after it, we had a big spike. Same thing happened in 1990 to 97, there was no real growth and interest rates were quite high in 1990 to 97. I'll tell you right now what the rates were, they're around the 7.5%. And then straight after, though, there's a big hike. So we always say this is a good time, especially if you can afford, because the competition is lower. And in saying that, we've been out priced every week, still on properties, and we're getting smashed. And I was with Mark on the weekend when I received a phone call from an agent on a property that we had a deal in principle on evan, ended up having twelve other offers come through or something like that. So it's still hot in certain areas based off the data. But from history we can see in these graphs, and I might put some of these graphs up on our social so people can see what we're talking about. These are the times where you should be able to get in evan, reap the rewards straight after, because rates are going to go up and down for the rest of your life. And it's really about taking advantage when you can. So far, I just throw that in. But in terms of and keep in.

Fadi: Mind, on that point, I've also agreed it's always a good thing. For example, if you're able to service a loan on today's market, if you're able to afford that loan at the higher rate and with the market a little bit lower. Discussed a couple of weeks ago once the market again. Shifts, like yes. You always told us the property market goes back up again. The interest rate starts to save up and come down again. You're in an unbelievable situation where you're able to service that loan at the highest possible rate when the market was down and you're now moving across to a place where your property is actually going up, you're seeing the capital gain, and your repayments are also going down. So if you're also asking if you have customers coming in, asking, is this now a good time? If you can service the loan right now, then it's actually an awesome time to do it right now, because in a couple of years you'll be laughing. And that's just my opinion.

Mark: Yeah, I was talking to a customer at a customer's house the other day, and we were just sort of going back and forth if today now is the right time or not. He's like, oh, maybe I should wait till the rates go down. Everyone else has to wait till the rates go down. And I told him, like, it makes absolutely no sense to make decisions on variable rates that we'll change over your 30 year loan term, like 100 plus times, make decisions based on the property market at the moment, in terms of is the market you're looking, is it like a good time to buy? Or at the moment, everything's sort of declining, which is obviously means it's a good time to buy. And history sort of tells us that it corrects sharply as well. So once you miss the dip, which you inevitably will, if you're waiting to hear an announcement on the news, sort of be priced out of the market. And I think we all have customers like that, that two years ago they came to us, I want to buy property and buy property, and then up to now, they still haven't bought anything because they're waiting for the div came. They're waiting till the bottom. They missed the bottom. It corrected sharply, and now they're like, now I'll just wait till next one. And they've missed out two years plus on capital growth. So as wise when you can afford it without putting a lot of stress on your immediate sort of life goal.

KM: I guess we'll go on to, okay, there's only so much we could talk about interest rates going up. It is kind of what it is, and they're going to continue to go up. And if you got the money, this is a good time to buy. And if you don't, I guess not about if you can't buy if you are going from a fixed or variable. And I guess this is going to tie into what Mark was talking about before in his tip of the week. But what tips are there besides that, that clients can look at to save money and get through this period of high interest rates?

Mark: I think restructuring, like, they need to like customers that have even when the rates were very low, if a customer had 50, 75, 100 grand, 200 grand, whatever, but just sitting there, I know the rates are very low in their fees, but why don't we split the loan? Why don't you have an offset you have 200 grand cash, why don't you speed the loan to have 200 grand variable and have your 200 grand sitting in the offset account so you're not charged any interest? It's not going to save you on your payments, but it will save you years off your loan, your shady is off your loan and you can access the funds at any time and all the other benefits with it. So I think restructuring is a big one. If you are currently fixed, you probably have some sort of regional facility that you can turn on on your loan. There are limits as to how much you can put in there, so definitely be very familiar with those after calling the bank because if you exceed them, some banks charge a break fee. But yeah, I think restructuring for me would be the one thing.

Fadi: Coming back on cost or in general. I think during the COVID period, everyone got, I mean, everyone, including ourselves, has all got a little bit more happy where we just found ourselves with a lot more money in our pockets because I guess so many grants are going out. Loan repayments were at an all time low. People added cars or added more holidays, which is I'm always up for in regards to autos lots of the cars, not into the cars that much, but I think it's just going back to basics, isn't it? Just cutting back on unnecessary, unnecessary activities or spending, going out to dinner. I think there's a one week where I was newly wet and we're going out to dinner every night because we just went public cooking. So I think going shopping, groceries and I think a good thing to do is actually having a budget in place, like a weekly budget, a month, monthly budget. This is the amount of money I want to be spending on movies, entertainment, going out, taking the kids out, wherever it may be and sticking to that budget for the time being and then putting yourself in a position where you're able, if you're looking to either purchase the property, looking to purchase the car, an investment property as well. This is the time to save. This is the time to actually hold back and save as much as you can because we're just seeing monthly repayments going up and they're not going to get any better soon. So I think just in everyday living senses, try and track back to pre code and try and remember what you were spending. This is something I've done with myself recently. What was I doing prior to COVID and what has that change come now where I'm actually spending more money than I ever was prior to COVID? And I think that's something that we all need to look at and try and hold back or try and save us as much as we can on everything. Groceries, petrol. I'm always trying to take the Mrs cart on my petrol to be honest.

KM: Yeah. You're dining out every day though because you're in the big bucks.

Fadi: Dining out is comfortable.

KM: You've lost touch of reality on the.

Fadi: Regular person more often now to try and get the food off them.

KM: Okay. Is there anything else really to add to in terms of saving? I mean, obviously budgeting and saving and whatnot, but I think really what you guys have touched on is pretty much everything there is. What you can do is definitely restructure and refinance your loans. I think that is the number one thing to do. Especially if there's a little bit of a cash back which will get you through a few extra months as well, which is always nice. And then finding what you don't need and spending less to get through these periods. But then remembering if you are looking to buy, if you are looking to invest, that we're making 30 year decisions here, we're not making a six month or three month decision. And that these interest rates are somewhat actually irrelevant to your strategy and you actually have to have a strategy. And if you don't have a strategy, then that's step one to build that strategy. Because once you have a strategy and a plan, the interest rates and everything else is quite irrelevant really. I don't think there's much else to add, to be honest. Fairly. Unless you wanted to add something else and yell at someone about something.

Fadi: Honestly, just the whole we've discussed this quite a bit and just to be a little bit more thorough in regards to Covered, what we saw in Covered isn't something that we're never going to see again in my opinion, in regards to rates going that low. One thing that did bug me, I know we speak to a lot of BDMs on a daily basis and different people inside the banks and then we had that discussion with them. I asked the question, Mark, how are we doing this to the public? How are we doing this to our customers with Year, they promised that I told them not to believe the RBA or believe any of the banks, that nothing is going to change until 2024 in regards to the interest rates going up or not. But why? We're in a position right now where we're increasing rates, knowing that a lot of the customers are going to start suffering, especially the ones that are coming up to fix interest rates. It's quite a shock. Like I don't know how many phone calls Mark and I are getting in the last couple of months saying, oh wait a minute, our interest rates have increased by $900 or so, by interest repayments have increased by $900 or by 1600, whatever it may be. It's a bit of a shock to the system and what we've always tried to do is educate our customers a little bit more in regards to first things first, the banks don't care about us, no matter how good the advertising or marketing is. Every single bank is the exact same thing. We're always trying to look or trying to chase that better rate, better monthly repayment, the products and features, whatever our strategy, like I said, may be. Second of all, the RBA don't care about us either at the the of end day, at the end of the day they're going to increase rates whether we like it or not. And what the bank's argument is, is that during COVID apparently the banks weren't making any money. Apparently when the banks were charging the 1.98 or the 1.75 interest rate, they weren't making any money. And that's why you're seeing every single bank out there taking advantage of passing, whether it's the full RBA increase or a portion of the RBA increase. Again, prior to COVID where RBA is coming up a zero point 25% increase or 0.15% increase, banks won't passing that full amount right now they are taking advantage because most banks, instead of reporting a ten or $20 billion year profit, they're only reporting a five to 7 billion profit, which apparently is not making them money. So I think at the end of the day we always need to do our kind of research. And one thing that Tony said on last week's podcast is having the right people around you have the right advice. Don't take advice on the TV or the media or the RBA. Speak to people around you, speak to your mortgage broker, speak to your buyer and speak to your financial tanner, speak to your accountant. These are the sort of people they want to keep in the loop. So you understand, first of all, if you have a strategy in place, tax benefits, any depreciation that you might get adbats on as well, any of those things as well. And when it comes to what should we be doing now in regards to our interest rates going up or I guess how do we try to balance that out? Like Mark said, restructure get in contact with your mortgage broker. Right now, what Mark and I are doing, a power lender is that we're doing three health checks for any customer that comes along. First thing they're actually doing is trying to negotiate with their current lender. Whether it benefits us or not, it doesn't really matter. We just want to try and help those customers out. If our current lender is not ready to come to the table, there are over 40 lenders on our panels that we're able to go to, including a cash back offer that we can try and help them out, which has also gone to Sweden, that deal. But I guess that's my five minute or couple of minute ran at the RBA and banks where honestly, as a broker, it actually burned me how the behavior and activities over the last maybe six or seven months from the RBA or the banks where they've actually promised our customers. As well in regards to not increasing anything to 2024 and you're finding people just being left behind and that's the most upsetting thing about this whole thing, to be honest.

KM: Yeah, I agree that the RBA probably should never have promised anything and even when they did, I remember on this podcast as well coming out and saying not to listen to this promise because if they need to, they will increase it I guess to the RBA's defense they really have no option, to be honest.

Mark: Three months prior yeah, well, of course.

KM: They could have started earlier but nonetheless, whether they started earlier or not, the interest rates were still going to go up. This is the highest inflation has been since 1988. Just looking at a graphing out. And there are three real ways to reduce interest rates. Reduce inflation and interest rates are like are the main way to do it. And it happens across the entire world. Every country is going through the same thing. And there are so many external economic factors that are impacting it mainly. Obviously, COVID didn't help, but then the war in Ukraine is making it worse. Global supply chains and whatnot. But it seems to be slowing, which is good. But yes, inflation is a wider issue. So if inflation doesn't come down, then you have a bigger problem than interest rates. So to their defense, I guess there's not so much they can do now. Yeah, they probably should have started again. They probably should have promised anyone anything. But I think that also comes back down to us educating our clients and customers and them having Buffers, what Tony was mentioning as well, last week's episode, having buffers in place and not overextending yourself. And if you can borrow five and that means 500 grand, it means you have $0 left over, maybe you shouldn't borrow 500, maybe you should borrow a little bit less to protect yourself.

Fadi: But I'm just going to be devil's advocate here, because you had to go in and say in the defense, then why, when Curvet happened, why bring those rates down? Why bring that Buffer rate down when they knew we had customers drive to Curve it that weren't able to borrow or service the exact same loan they got during COVID Yeah.

KM: I'll explain because the RBA sets interest rates based off a lot of things, right? The interest rate that they set is not solely on housing. We look at it solely from a housing perspective because this is our industry and this is what most people talk about, is because it's what the retail world or what general public and consumers can relate to is housing interest rates. But the official interest rate impacts a lot more than just housing. So when COVID occurred and global supply chains essentially were cut off and nothing was coming into the country and people were not working or were from home and there had to be government stimulus, all this extra money needs to come somewhere and we need to stimulate the economy because we weren't moving. So to stimulate the economy, the RBA is always in this every reserve bank of every country. Their job is to try and maintain and balance is to balance the economy. We don't want to have it too low and we don't want to have it too high. Right now we're too high and during COVID too low. But the problem is economic activity was so low during COVID and there was lack of jobs, lack of housing sales, lack of everything that they needed to stimulate. The way to stimulate it is you tell people hey, money is cheap, borrowed. So what happened? Money was cheap, everyone borrowed and everyone bought stuff and it became very expensive. Right now inflation is too high but the inflation has flown past where it was supposed to be. The target was like 2.4%. But the reason as well is not just covered. If it was just a Covert thing, we would probably already be out of it. The war and supply chain is still not opening, has pushed this a lot, made it a lot worse and we're seeing that the war impact has gone everywhere. Every country is kind of copying it. So the reserve bank's job is when they set an interest rate. It's not about housing. Real estate is one aspect of about 200 different criteria points that they look at when they set this interest rate. The reason that we talk about it and we're so effective is obviously because it's our industry but it's also what people can relate to. But essentially the idea behind it is during COVID right? They want businesses to continue to work and they want businesses to continue to hire and I'm more likely to borrow money if it's cheaper as opposed to more expensive, right? So right now we're seeing the interest rates are going up less, people are likely to borrow money because it's more expensive. So we are trying to slow down the economy and bring prices down by increasing interest rates. So bringing inflation down. What happens in the opposite when there is no activity and we want it to happen? We say hey, here's money, we're giving out everyone free money. What does everyone do with that free money? They go and spend it. You build economic trade and stuff, it comes back up. So it is a difficult task trying to find the middle ground because it's not just based off our own nation's issues. Unfortunately it's a global economic, I don't want to say the word crisis, but it's a global economic issue that they're trying to solve and I think it's tough, I think it's tough to find. I mean, they could have started earlier. We would still be in the same.

Fadi: Position though, whether they started early or not. I completely understand everything you pretty much said in regards to the economy, the market or whatever it may be, but it kind of feels like these customers during COVID that will give an exceptional amount. Don't get me wrong. Some of the responsibility also goes on the customers, because Mark and I also warned them. And what we saw during auctions, and you saw this more than any of us came in is that Pig might access to funds they've never had access to before. And the full process of going into the auction. And we've heard it from customers before, and that's why we kind of have to turn down a few customers, say, oh, we're not really comfortable writing this loan for you is I have to get this house at whatever price I can, even if it means I maximize myself out. And that's what bugs me. Like the RBA or the bank said, let's give these kids or these people that come through young couples that come through, ones that just finished school and they've just started working, whatever it may be, let's give them two good years, and then after that two years, let's put them in a position where they're not even able to service their current loan.

KM: I don't think that was the intention.

Fadi: That's exactly what's happened. That's what I'm saying. There are more of a *** rule saying, you know what? Now we need more of a surplus. What if the rates were to go to what it were right to cope with? That's what should have been done. And it's what really bugs me about the Royal Commission and here's my rent, is that the Royal Commissioner attacking every single swipe at a broker. But ideally, we've had customers come to brokers and we told them we can't service the loan, but they can walk into the branch and they stay and somehow service through the same bank that we told them they can't service from because they've lowered their living expenses. Second of all, the banks have pretty much said, you can afford this loan, have a happy life, and within two years saying, sorry, you can't even afford that loan.

KM: Yeah, I agree with you. I think this is more like an individual bank problem than an RBA problem, to be honest. I see in a very famous auctionee, I mentioned his name because he's more famous than me and he might crush me, but he made a post and he was yelling at the RBA and stuff. But really, it's a wider economic problem. I mean, the RBA interest rate is not a simple figure to figure out. There are so many points to it. And I don't think the RBA's intention, when the interest rates were so low, was to stuff people over into his time. I think when you speak about the Royal Commission, I agree with you because the responsibility lies on the retail bank, not the RBA. The RBA is set to set a rate for the country, for the nation. And when there is a retail rate when there is retail responsibility from the banks to make sure that the people who are borrowing can actually borrow and service. And that's why you have buffers and whatnot. I don't think the RBA because it doesn't help the RBA for them doing what they're doing now and to put people in this situation, it doesn't actually solve a problem. So I don't feel the intention, but I agree with you. I think there needs to be some sort of I mean, that's why you had the Royal Commission. But I think the responsibility lays more with the banks as opposed to the RBA because the interest rate is somewhat the official interest rate is at the end of the day. Well, the bank can charge the official interest rate, right? The banks don't have to make money, right? Obviously they want to and they will, but the responsibility lies on them. The RBA is saying, here is the official cash rate. You do what you need to do with that and you charge what you want to charge. At the end of the day, it's a private institution. So I think the responsibility lies with the banks more so than the RBA. The RBA is setting a rate that's based off so much data and so many economic issues, as opposed to just housing, which is definitely one of them. But, yeah, definitely. And that's why you guys are so important in your role, is to educate and make sure that this is a smart decision for you today and tomorrow and not just today. Okay?

Fadi: The way you put it, I can agree about it. Let's put the RBA aside. The banks so the bankroll commission, what's our friend's name of leading the whole thing against brokers and how brokers are not doing taking the best interest I can't remember. It's not targeting brokers. All right, what I want to see is where this responsibility from banks, where they were fully aware that these customers that price cover came and saw them, said they can afford this loan. Maybe the bank should have told them, listen, guys, we can give you this loan take because of the RBA, the cash flow, the buffer or whatever it may be, but keep in mind, for the next two to three years, this is going to completely change whether we like it or not. It's not in our control. That's where the bank and I believe the Royal Commission should be doing a lot more job to keep those people more accountable. Because honestly, I've had some funny conversations with customers. I think funny where it's funny to have, but I can completely understand where the customer is coming from. One day they're not held accountable. Okay, if the banks knew I couldn't afford this one in two to three years or we're going to increase this buffer rate or increase their customer rate in two to three years, why wasn't I made aware? I'm not talking about people that are going through a broker because I'm talking people that went directly to banks now. And like I said, we've had customers approach, Mark and I, in regards to living expenses, and we said, no, you can't afford the loan. And they walked into the branch the next day and branch managers or branch workers or whatever it may be, will be like, no, that's okay, we just lower those living expenses and **** that. No compliance, no looking after the best interest duty of the customer, which is what we're actually under did, best interest duty of customer. And that's what frustrates me the most. And I'll leave it at that because I'm going to get a bit walled up.

KM: Well, we'll leave it at that because as well, Mark has a meeting in about five minutes, so we'll wrap it up. And thank you, everyone, for listening. Stay tuned, keep listening. And I think we're getting some big numbers. And anyone that's listening to this podcast, I don't think we've ever asked for anything, but I'm going to ask people to just do one thing. I don't want you guys to like or subscribe or give us a five star, but please do if you want to. But I'm going to ask if you do actually listen and you like it and you're a regular. Listener just tell one person because it makes our lives a bit nicer and gives us more ideas and different motivation to keep doing what we're doing. So if everyone that's listening just tells one person, we're going to grow this thing to be really big and help as many people as we can along the way. So that's my ask. That's about it. Thank you guys and we'll talk soon. Thanks.