Take advantage of low interest rates

Interest rates remain at historically low levels in many parts of the world and in Australia they are still relatively low compared to previous decades. This has meant many Australians have enjoyed lower mortgage repayments.

Of course, low interest rates have a much broader application – they also flow through (to various degrees) into personal and investment loans, credit cards and various types of business financing. And on the flip side, investors have seen returns on bank accounts, term deposits and a variety of managed funds follow suit.

Across the economy generally, the low interest rate environment
often goes hand-in-hand with slower economic growth, uncertain job prospects
and lower asset prices.

So, depending on which category you fit into, here are a few implications worth considering in your approach to dealing with interest rates:

• Homeowners: With variable rates still low, you could use this as an opportunity to build a buffer against rates when they eventually rise. Or are there other more pressing items that your spare cash flow could be directed towards, such as credit cards or a car loan? On the other hand, renovating or upgrading existing properties has gained much favour of late, with prices generally stable and tradesmen more likely to return phone calls. It’s all a matter of personal preference, it’s just a good idea to get a strategy in place which will suit your future needs.
• Investors: Whether your preference is shares, property or another asset class, this may be a good time to consider starting a long-term growth strategy. Given that dividend yields and rents may have changed since you last did the numbers, it’s worth another look to determine if potential investments are likely to be positively or negatively geared.
• Business owners: Overdrafts, car leasing and other business loans may be in need of a review. In particular, any strategy to reduce your debt should be revisited to ensure you are addressing the most
  expensive debt first.
• Deposit holders: Low short-term returns on cash may make you feel like there would be little difference if you put it under the mattress. There’s bound to be plenty of apparent alternatives to give your returns a boost, however it’s critical to read the fine print and understand what you’re investing in. The adage of higher returns meaning higher risk generally holds true, so make sure your ability to manage that risk is properly addressed.

Unfortunately, interest rates will not remain low forever. Now is a great time to think about how you can use the current situation to your advantage. At Kim Kershaw Finance, we are available to help you ensure you can do just that.

KK’s gut instinct

Here’s my gut instinct about the property market:

“The housing property market is flat, due to a mix of sellers having an inflated expectation of price due to the crazy prices over the past 12 months. The RBA has a strong hold on rates and the federal election will halt activity across many segments and industries. There will be some good buying post August. For those we some spare readies, look west and north.”

Now, tell me what your gut instinct is telling you! Email me at kim@kimkershaw.com.au and let
me know.

Sporting tip of the month

Richmond will finish 8th, win the first final and get belted by 80 points in the second final!

What do you think?

About our newsletter

The KK Finance newsletter is a free monthly ezine/e-newsletter for clients, colleagues, friends and family. I’ll be staying in touch with regular tips and news to help you stay ahead when it comes to your finances.

If you think of anyone who would enjoy receiving this newsletter, please share it with them.