The big four banks have all reworked their economic growth forecasts following the twelfth rise in interest rates from the Reserve Bank and two banks (ANZ and Westpac) are tipping a technical recession, which means six months or two quarters of when the economy goes backwards. A technical recession means the economy shrinks, unemployment rises and businesses go broke.

With this black cloud looming, a couple of lenders are advising any borrower under repayment pressure to get smart, stop being apathetic and look for alternative loans.

Growth forecasts

The table above, compiled by the SMH’s Rachel Clun, shows how economists have downgraded our economic future as interest rates are squeezing consumers. And it will only get worse as fixed rate borrowers are forced onto higher variable rate home loans over the next 12 months.

If you look at the first column, you see the big banks forecast growth in 2023 ranging from 0.5% (with NAB) to 1% (for ANZ). However, Treasury and the RBA see it noticeably higher at 1.75% and 1.2%, but these were before Dr Phil Lowe took the cash rate to 4.15% this month.

The Treasurer thinks our high level of employment will soften the blow of a shrinking economy and Westpac’s chief economist Bill Evans believes saving buffers built up during the pandemic lockdowns will also help many households.

That said, this is what he told the SMH: ““The key driver of this insipid growth outlook is household consumption, which we now expect to grow by just 0.3 per cent in 2023 and 0.6 per cent in 2024.”

Of course, the banking economists could be wrong, and their calculations could be too pessimistic, but we should know if they right by the start of the December quarter, when a lot of borrowers have gone over the mortgage cliff into higher home loan repayments.

In advance of that, Mortgage Choice and Athena Home Loans are embarking on an education program telling borrowers that loyalty to banks and other lenders are costing them tens of thousands of dollars.

Mortgage Choice calculates the household sector will give banks and other lenders $8.9 billion more in repayments than they should have to because of apathy!

Mortgage Choice CEO Anthony Waldron said their research showed nine out of 10 borrowers think they should get the same deal as new borrowers, but they usually pay 0.41% more.

CEO of Athena Home Loans, Nathan Walsh, said most borrowers don’t realise the real cost of sticking with the same lender, who doesn’t offer a better deal to what the average borrower gets. “When you think about 0.41%, 41 basis points,” he told the Daily Telegraph, “Many consumers don’t realise what that means for a typical borrower — $40,000 over the life of the loan.”

Historically, I’ve always tried to educate borrowers to check out mortgage brokers to see if they can get a better deal, but I think apathy has got in the way of people saving on home loan repayments and therefore building their wealth.

Right now, the smarter borrowers can be, the more they will save. That will not only help their personal cash flow and economic situation, but they might also help reduce the chances of Australia ending up in recession!

P.S. Mortgage Choice and Athena have a new loan product that guarantees existing customers will get the same as a new customer, and if they pay more off their home loan, their rate of interest will be cut! The product is called Mortgage Choice Freedom, which is a newie on the lending block.