THE BROKER TIMES

Proactive Serviceability Strategies to Protect Variable Rate Clients

1. The Contradiction: Rates vs. Risk

RATES: Easing Forecast

3.1% - 3.35%

Terminal Cash Rate Forecast (Early 2026). Falling rates stimulate refinancing.

RISK: Labour Market Softening

4.5%

Seasonally Adjusted Unemployment Rate (Sep 2025). 4-year high, undermining serviceability.

The Critical Risk Pivot: APRA's 'Income Gap'

Old Primary Risk

Interest Rate Exposure

→ SHIFT →

New Primary Risk

Income Shock / Erosion

The APRA 3% stress test protects against rising rates, offering zero defense against job loss or hours reduction.

2. Identifying Vulnerability: High-Risk Clients

● Financial Red Flags

  • • Low/Zero **Offset/Redraw:** Minimal liquidity to cover mandatory payments.
  • • High **DTI / Low NSR:** Dangerously low cash flow flexibility against income drops.
  • • Reliance on **Irregular Income** (e.g., bonuses, overtime) that are first to be cut.

● Employment & Industry Exposure

High-Risk Status:

  • **Casual Employees** (No guaranteed hours, no paid leave).
  • **Contractors / Sole Traders** (Income tied to weak discretionary spending).

Vulnerable Industries:

  • Accommodation & Food Services (Highest job turnover).
  • Retail Trade & Administrative Services.
  • **Construction** (Sensitive to cooling investment/slowdowns).

3. The Solution: Proactive 'Survival Buffer' Modeling

Income Shock Survival Buffer Assessment

6

Minimum Protection Period (Months)

100%

Income Loss Modelled (Primary Employment)

Target Example

$10,680

Required Liquid Capital

JobSeeker Trap: Lenders typically *do not* accept JobSeeker payments for serviceability. The buffer must cover the full P&I deficit.

Strategic Buffer Creation (While Still Employed)

Prioritize Liquidity:

Offset accounts offer maximum liquidity and instant access—the superior tool for an emergency buffer.

Leverage Equity Defensively:

Consolidate high-interest consumer debt (Credit Cards) to **significantly reduce** the monthly mandatory P&I repayment.

4. Final Safety Net: Hardship & BID Fulfillment

Myth-Busting: Credit Reporting

Seeking hardship does NOT automatically damage the credit score.

Under Comprehensive Credit Reporting (CCR), if the client adheres to the **agreed** hardship arrangement, their payment status remains 'up-to-date.' This removes a major psychological barrier.

Broker's Mandate in Crisis

The broker's role is to facilitate the referral to the lender’s hardship officer and ensure the client:

  • Documents all communications.
  • Proposes a **realistic** variation (reduction/forbearance).
  • Avoids exploitative refinancing offers while in distress.

Conclusion: Resilience is the New Competitive Advantage.