How To Protect Your Finances In 2018 And Beyond
Have you considered how you are going to protect your finances, as we move through the current market?
It has been getting more and more tricky to obtain finance over the last few years, and according to Nathan, this is likely to continue.
On the upside, the current market presents a great time to buy.
But, how do you overcome lending restrictions in order to take advantage of the next bargain?
How do you protect your finances now that the GFD is happening?
The answer lies in having a good understanding of the finance market.
The importance of being on top of your finances.
The property market is dependent on the world of finance. Without loans, the majority of buyers would not be able to purchase property at all, let alone build portfolios.
Having a good understanding of the finance market will help you move forward with your investing. It will help you to identify the movements of the property market and create clarity around your next purchase.
Lending is getting even tighter.
It has become increasingly difficult to borrow money since the end of 2015. Prudential lending regulations introduced by APRA at this time made it necessary for borrowers to prove they could service a loan with at least 7 per cent interest attached.
Nathan sees this difficulty continuing.
Rates are going up despite the cash rate staying low.
The RBA cash rate has stayed at 1.5 per cent for 21 consecutive months now. This is unheard of historically – especially since the rate itself is so low.
The interesting thing is that banks have been upping interest rates independently of this.
The reason it is becoming more difficult and expensive to borrow is because during the GFC, a lot of lenders got funding from overseas and other central banks.
Since then, the cost of this funding has gone up. This means that loans are more expensive to issue.
Liquidity is much tighter and this has caused some suppression on lending.
Will rates continue to rise?
Nathan thinks it is likely banks will increase rates by another half a per cent or so over the coming six to 12 months.
Now is not the time to be scared.
While countless people out there are becoming fearful thanks to the doom and gloom stories on the news, others are seeing things more clearly.
Banks are tightening their credit policies all over the world, and while less people are able to obtain finance, more and more bargains are presenting themselves.
Now is not the time to be scared – but, it is the time to be prepared.
Speaking with a finance strategist can alleviate any concerns you may have about your own financial situation. While Nathan is a pretty accurate commentator, he is not a qualified financial advisor. He simply likes to analyse the market for his own interest as a property investor.
How will tightened lending affect your equity?
Nathan believes now is a good time to make sure you can access your equity. He says, if property prices become softer it will affect valuations done by the bank. This means borrowers won’t be able to access as much equity as they could have when prices were stronger.
He also points out, that after the GFC, some banks were capping the amount of equity they would issue to customers to as little as $10,000. So, even if you had $100,000 of equity available on a property, you would only be able to access $10,000.
Being able to structure your finances is very important – if Nathan hadn’t been able to do this he wouldn’t have been able to pick up so many bargains during and after the GFC.
In order to take advantage of the opportunities in today’s market and beyond, it is important to assess your finances and develop a well-thought out strategy. Knowledge is power – so, get out there and figure out how to make your next move!
How have lending restrictions affected your property investing over the last few years? Please share your experiences in the comments section below.