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[Podcast] How to deal with the banks when interest rates are rising, with Dan Gold

[Podcast] How to deal with the banks when interest rates are rising, with Dan Gold
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I’ve often said that property investment is a game of finance with some houses thrown in the middle. My Podcast 408

But currently, more and more investors and homeowners are having difficulty getting finance in the rising interest rate environment.

So, what should you do? What type of finance strategy should you have to prepare yourself for what’s ahead?  And how do you deal with the banks?

And do you know about private lending channels? What are they, and how can you take advantage of them?

That’s what I discuss in today’s podcast with Daniel Gold.

I also chat with Greg Hankinson, director of Metropole Constructions about how much building costs have risen recently and what’s ahead for construction costs.

Dealing with Banks When Interest Rates are Rising

If you are interested in property, you can't steer clear of all the news about rising interest rates, can you?

And as I said in the introduction, finance is an integral part of property investment.

But over the years, I realized that most investors don't have a financial strategy.

I guess most investors don't even have a real property strategy - because buying an investment property isn't really a strategy, is it?

So, what strategies should you employ in this interesting stage of the property market, that’s what I ask Daniel Gold, award-winning finance broker and principal of Long Property.

In contrast to the RBA’s advice last year that rates wouldn’t move until 2024, interest rates started rising earlier in May this year and delivered a shock-and-awe campaign of massive interest rate hikes.

And we're likely to see a few more rate increases before this cycle is out.

Obviously, this is all about trying to bring inflation down to more reasonable levels.

Of course, this has an impact on variable-rate borrowers and those due to come off fixed rates in the near term, with higher monthly mortgage payments due to increased interest costs.

And clearly, rising interest rates are hampering investors borrowing capacity, and the banks seem to be more cautious than ever.

How do you deal with the banks in this rising interest rate environment?

  • Preparing for fixed rate and interest-only expiries
    • Be proactive and speak with your bankers or brokers directly
  • Re-testing borrowing capacities when rates rise Interest Rates3
  • In most cases, you may not be paying anything extra on a higher loan because you’ll be able to keep more money in your offset account
  • How to navigate the pre-approval and buying process with these constant changes
    • A preapproval doesn’t mean that you have a particular loan amount locked in
  • New pricing and policies to be aware of
    • Published rates are negotiable

Are the banks still keen for new business?

  • Negotiable published ratesBanks 2
  • How can you get the best deal?
  • Being proactive and being prepared
  • Discount rates are misleading.
  • What are comparison rates, and how are they calculated?
    • Comparison rates help clients compare different loans and their variables side-by-side

What are private bank channels, and how do they differ from the standard retail channels?

  • Different from private lenders and funders. These are channels of the mainstream funders
    • but there are of course certain criteria that need to be met to qualify.
    • Many layers are in place, so these private channels may make the process slower

What’s happening to construction costs, and what’s ahead?

  • Huge annual increases in construction costs Construction2
  • Increases are being caused by:
  • Global supply of building materials
  • Immigration is down
  • Skilled labour is at all-time lows

Links and Resources:

Michael Yardney

Dan Gold  Director Long Property Finance Brokers

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Some of our favourite quotes from the show:

“I guess most people don’t realize there are a number of doors where you can get into the bank.” –Michael Yardney

“I guess the bottom line is, the banks are open for business, you’ve got to get the best deal that suits you, and the best deal isn’t always related to the interest rate.” – Michael Yardney

“I’d also suggest you actually allow a buffer because there’s always extra costs.” –  Michael Yardney


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.

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