Peter Gordon Dip.FP. & Dip.FMB.
e peter@investoproperty.com.au
Ph: 0401 214 134

What Happens if Interest Rates Go Up?

Monday, 16th December 2013

 

The long range forecast for interest rates is that they will remain low, which is great news for property investors. However, if you are like us and want a little more certainty and control when investing then look at cash flow and fixing your interest rate.

Interest rates are at an all time low which certainly helps make property investing easier and more affordable. One of the questions we get asked is how long will we enjoy these low interest rates? Our answer is simple, interest rates will always move up and down, the important point is to create an investment strategy that gives you control and certainty.

 

Cash Flow

We talk a lot about the importance of Cash Flow when it comes to investing in property. If you take the time to structure your investment to ensure your cash flow is strong and you are using as little of your money each week to invest you will be in a much better position when interest rates rise.

Work out how much you can afford to invest towards your property each week. If the investment property is costing you $60 per week and you can comfortably afford to invest $150 per week. The extra $100 per week we call your ‘Buffer’. Look at your Cash Flow and calculate how it might look if interests rates increase by 1% or 2%. When you commit to your investment plan you already know you can afford the extra repayments if interest rates increase.

 

Fixing Your Interest Rate

With interest rates as low as they are right now it is tempting to stay at the variable rate and pretend that they won’t go up. The reality is however that at some point they will. You can take the risk that they will stay low for a protracted period of time or if you want to lock in some certainty then look to Fix Your Rate this will immediately give you a better cash flow position which then gives you more certainty when rates rise in the future.

 

If you have any questions or would like further information please contact peter@investoproperty.com.au