Interest Rates

Hey there, interest rates, It's Aaron from Diagnostics and Finance. Just want to talk about interest rates for the moment. There's a couple of things in, in the last 10 years or so we've had a declining interest rate. Now with a declining interest rate, a lot of people ask me what to do to be able to help their whole budget related to a decrease in an interest rate. So you might have been paying $1000 a week. Now not saying that every mortgage is 1000. I'm just using number using $1000 a week and the interest rate is deducted and now you only have to pay 900 a week. Well, when it was reducing, we had $100 to spare. So what were you doing with that $100? So if we were using that $100 of payment and putting off the principal, we would save a lot more money. Also what that would have done is when the interest rate dropped again and again and again and now your minimum repayment was $500, but you were paying $1,000. You could have kept paying 1,000 and your situation was redraw offset account would be very, very, very big. Now as we come to now where the interest rate and the RBA has the interest rates at the lowest levels and emergency levels at point one and we're starting to talk about an interest rate rise, I'm starting to get a lot of conversations about what, what do we need to do? Do we need to lock it in? Do we need to do anything like that? And one of the things, the rate rate locking and the rates that are fixed keep changing at the moment. And that's a hard thing to try to keep a handle on. So if you've had a mortgage before and the rates were going down and you had that buffer, what did you do to that buffer? Did you put that in your owner occupied mortgage? Did you invest it? What did you do with that money to be able to better your situation? So that now when we're looking at the interest rate rises, which is inevitable, and I can tell you I've come from an area where my interest rate was 8 or 9% and that was back in 2005. And I've also gone through the period where a 4.99 owner occupied 50 fixed rate was very, very hot on the market and wanted to be fixed in. And that is one that I fixed in before. Before I was playing a different game. So in the interest rate environment, what are we looking at? How do we budget? How do we figure out if we're going to be okay. With a interest rate rise. So number one, interest rate rise, if we can refinance you down to a lower level, say you're at 3%, owner occupied, principal and interest, and we can refinance you down to some of the rates that are in the market, depending on the el, down to 2.09. We now have a buffer, we have a buffer of the ability to accommodate what we were paying before. So what we're paying now, if a rate rise comes up. So if you're at 3% and you're able to get 2.19, well now you can go up a couple of rate rises without it affecting you because it was where you were beforehand. What can we do with other aspects? What do you have owing outside your mortgage? Were you able to, during the time of interest rate reductions, move some of the savings that you're getting because your interest rate was reduced to your credit card, to your car loan, to your other ones or you still have those ones, is there a way that we can look at your whole situation and see if any consolidation is appropriate for your circumstances? So looking at rate rises, we're at emergency levels now, so if it rises, is it a big deal? Maybe it is for you. Maybe we need to have a bit more of an in depth conversation or the other one is that a lot of business owners may have taken out a more of an old doc or an accountant's letter declaration style loan and their interest rate is, is already up at the 6 or 7% and that needs to be looked at as well. So what I would, what I would suggest is that there is so much variability right now, there's so much stuff in the media, we need to break it down and look at our own circumstances and analyze our own stuff. So it could be as simple that you have a low loan and you're overpaying it and you can come out and buy some more stuff. It might be that you've bought a lot of investment properties and things recently and you might want to have a look at what you can do to get any more deductions out of the bank that you're on. Or it might be you are the person that has a bit of a worry in this area and they want to do some stuff around the house and they want to get rid of credit cards and other things and smooth those repayments in out by investigating whether a debt consolidation loan is right for you. But all in all, the best way to overcome interest rate rises is to start from a lower spot, have less debt outside your mortgage. And I would be thinking about what can you do when we were paying higher rates, what can we do as we go forward? If we're taking out a mortgage today, can we pay a mortgage at a higher rate? If you're going to be paying 3%, let's calculate your repayment. Three and a half, 4%, 4.5%. And if you can manage those payments now and you keep paying them now, well before the banks come in with any rises, you're going to get ahead of the game. So play the game. Put a buffer in the banks. Do it all the time when they assess you. Put a buffer in today and then you should be well on the way to ignoring whatever the media spin is and really narrowing in on what you need to do for your circumstances versus all the fluff out there. All right, it's Aaron here. If you need a little hand to break this down. Look at your circumstances, how the interest rates work for you and how we can make them work better for you. Reach out today.