Some good advice on the current financial crisis.
With what’s happening today, the cost of living is going up and interest rates are going up, what is the best advice? What should you be doing? Adam Humphreys Director of Finance at LZR Partners talks about some suggestions on what you could be doing to reduce the stress of today’s economic crisis.
My advice. Don’t wait!
Affordability in terms of what lenders are doing now is going through the roof. Banks’ assessment rates are generally between 2.5 to 3% above the current lender rates. So, if you’re not doing something now and the forecast is that rates will continue to go up, by the time you come to doing something, you may not be able to do anything. You might be stuck with your current lender and not able to move because as official rates increase your ability to borrow may decrease and possibly your equity in your property is also decreasing so you may longer qualify to refinance or restructure. Then you’re in a really hard situation.
I’ll explain that.
We all think property prices will probably drop because people can’t afford to borrow as much. If you’re in the situation where your investment is geared, (at the moment it’s generally 70% to 80% equity ratio) and property prices are on the way down, your equity position is going to disappear quickly. So, if you want to restructure, if you want to look at what your options are, you need to do it now! To a certain extent, people may have missed the boat. I’m starting to see situations where people aren’t qualifying on even restructuring onto other loan products.
Stuck with your lender.
You might end up stuck with the lender you’re with. Even if you are on a fixed rate now when you come off that fixed rate, you will likely default to the highest variable interest rate with your current lender under your current loan contract and you may have no option on where you can move to. That’s because you won’t qualify with any other lenders. That’s my advice, address your situation now. If you’re concerned about what the picture’s going to look like in 12 months, don’t look at it in 12 months. Look at it now.
