Higher interest rates… Higher property prices… What’s next?
Higher interest rates… Higher property prices… What’s next? The truth is, does it really matter? All these things are out of your control. BUT what you can control is your mind, and that is the only thing that will make ALL the difference between your financial position today to your financial position 10 years from now.
Your mind is the most powerful force in the universe and it can shape you, and all things that matter to you. Your mindset is the difference between being broke, surviving, or thriving..!!
Let me elaborate with some examples.
Higher interest rates…
Over the last few weeks, most banks and lenders have increased variable interest rates, mainly relating to interest-only (IO) investor loans, as well as IO home loans (to a degree).
Clients with investment loans are upset why this is happening. After all, why should I pay 4.50% for my investment loan when I was paying below 4% a month ago. Right?
3 years ago we were all paying between 5% and 6% for home loan rates and at that time, this was the norm. 3 years before that (6 years ago) we were paying between 7% and 8% for home loan rates, again at that time we were OK with it as that was the norm (source).
Today, we’re still paying historical low interest rates, below 5%, yet we are more upset than ever before. Why? Simply because our mind has shifted. We think that a rate in the mid or high 4’s is unacceptable. Yet if I offered a client a rate of 4.5% (…or even 5%) 6 years ago, they would have thought I was God.
I think you know where I’m going with this. Interest is a cost of borrowing money and a cost of doing business. Some clients are thinking of selling up their investment property, or even worse stop investing because rates are going up. The papers are also telling them that the market is over heated and a crash is looming. I’ve been hearing that story for over 20 years, and thankfully I ignored the noise and stood firm by my strategy. I know many of my clients did the same, and today they are laughing (in a good way).
You’ve heard me say it before. Ignore the noise, stop reading the papers, and focus on your bigger picture.
Higher property prices…
I bought my first property at the tender age of 18 (1989), at which time I bought a 1 bedroom flat in Thornbury for $65k (Thornbury is 7 kilometers from the Melbourne CBD). Two years after that I bought a house in Keilor Downs on 700 sqm of land for $102k. What do you think both these properties are worth today? Yet at the time $65k for the 1 bedroom flat felt like a mountain to climb, and $102k for the house was like Mount Everest.
Think about it, today the median price for Melbourne homes is $800k+, yet previously it was a very different story. Ready to cry… In 1970 it was ~$12k, in 1980 it was ~$43k, in 1990 it was ~$147k, in 2000 it was ~$253k, in 2010 it was ~$559k (source).
Even with a median house price today of ~$800k, let’s be honest, a million dollars doesn’t buy you much does it? Even many outer suburbs in Melbourne are joining the million dollar club very quickly.
I remember the first time I signed a purchase contract for $1.25m for a PPOR home (back in 2007). It was exciting but nerve wrecking at the same time. Today, I buy investment properties (as development sites) well in excess of $1m and I don’t blink. Why? simply because my mind has shifted and I programmed my mind to take action so long as the numbers stack up and my strategy is solid. The purchase price is just a number..!!
I don’t know and I don’t really care. All I care about is the long-term picture and not the next 12 or 24 months.
When it’s all said and done, usually there is more that’s said than done. At least that’s what the masses will do. More said, less done. You know you’re better than that, and you know you have the capacity to do more and give yourself and your family an extraordinary life that will make you proud.
Take action, ignore the noise, and surround yourself around the right people to keep your mind on the right path to achieve whatever you want.
Your mind is your super power, but it can also be your worst enemy. Kryptonite was the only thing that could kill Superman, and your negative beliefs or negative mindset is the only thing that can (and will) kill your financial security and your financial freedom.
It’s true what they say, money is not everything. Health and happiness is. But health and happiness with money is extraordinary, as it allows you to enjoy what life has to offer which includes all those experiences you always think about and dream about.
Disclaimer: This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and seek specialist advice from a qualified and licensed advisor.
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