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Do interest rates matter?

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Transcript

Do interest rates really matter. When looking at your property journey, costs and incomings are the two most important things in terms of “my long-term goal is having a passive income” but then also having wealth created to pass on for future generations. So from that angle your costs and incomings are going to be so important. Income, expenses so forth. Now interest rates probably make up the biggest component of your cost your mortgage itself and why I say doesn’t really matter is that actually really depends on where you are in your journey.

For some people getting on the property map is extremely important. And for them they may not have the same channels of approvals and they may look to go to alternate lenders or people who are looking at their unique scenario for what it is. In that case to get on the ladder maybe it does cost them a little bit more interest. Then you would say here’s the case of me not getting any lending versus me getting an asset did interest rate matter as much to you? So In just that simple scenario there are people where it may not make as much of a difference. Then there are personal scenarios where you might go – ”Well, look I’m investing and I’ve maybe built a 10 property portfolio ornate property portfolio and now what’s more important than ever is access to finance because I’ve built this big property portfolio, leverage has been helping me to get a portfolio where equities risen substantially and now I’ve got this wealth creation”. Maybe I’ve got some decent incomes coming in from the rent, but the banks don’t always see those incomes in the same way as your pocket may see it. And so from that perspective, you might be kept out or locked. From that angle you might say “Well I can genuinely afford it but this bank is not seeing it – and other bank is” And from that angle the charging them more interest rates.

When you’re at a certain level of your property journey, sometimes the deal becomes more important than the cost, and sometimes paying the right price is more valuable than anything. But paying the right prices important, but some people may say “Well pay the price now so you don’t have to pay the price later”. And in that example what that really means is by adding that investment now knowingly understanding basically the costs that are going out and in maybe the higher interest rates may not be as impactful to you as not having the asset at all. So I think from that perspective it’s really situation dependent and you may see, you know online banks with 2.99 or three and a half or three point two or three point eight percent whatever it is and you might go hold on a minute so much better than mine. But when you realize that if you were to say I want to refinance every time there’s a better rate you’d be refinancing every six months maybe even every 12 and sometimes every three months because the first place position is always changing. So it’s part of your journey, interest rates are important. But they aren’t “the” most important because when you’re considering investing, the deal might be more important than the rate you get itself.

Someone understanding your position may be more important than what dollar you save. Maybe your going to save more in interest rates, but the bank asks you for a hundred more things and causes you an inconvenience that you’re just not willing to partaken. And then other side’s might be well you go and see a cheaper interest rate, but you go online and they just can’t accept the way your scenarios held. For example, there are some digital banks at the moment who only look at Capital Cities. Some may only look at areas where certain jobs and you’re in professionals of either law, finance or medicine and from that industry, you might not be able to get a loan with them anyway. So I think in that example, it’s important to know that interest rates are very important outgoing of your portfolio, but they don’t always matter and I think that’s when it becomes about your situation and what you’re looking to achieve and then at that point they might come a later stage in your life where you might go to an optimization phase of your portfolio and start to say “Well now’s the time for me to look at interest rates reduce my costs to create a bigger income”.

So that’s it from us here at InvestorKit, the Experts in Wealth Creation, helping you take action.