In the world of finance, change is the only constant. As we move through 2023, one significant change that has been sending ripples through the investment landscape is the rapid increase in interest rates. While it may seem like a distant concept to some, it has very real consequences for investors, impacting both their portfolios and their peace of mind.
Historically, interest rate hikes have always been a hot topic. Think back to the early 1980s when the Federal Reserve under Chairman Paul Volcker implemented aggressive rate hikes to combat rampant inflation. Interest rates soared to astronomical levels, with the federal funds rate reaching an astonishing 20%! Investors at that time faced massive headwinds as the cost of borrowing soared, and it became increasingly challenging to secure affordable loans for investments.
Now, in late 2023, we have experienced another surge in interest rates, though nowhere near the extreme levels of the past. The speed of these rate hikes has taken many by surprise, with the Federal Reserve signalling a more aggressive stance than in recent years. While it's important to keep the context in mind (interest rates were at historic lows for a prolonged period), the sudden shift has left some investors scrambling to adjust their strategies.
The speed at which interest rates have climbed this year has caught many investors off guard, leaving investors scrambling to adjust their strategies. Many investors took advantage of very low fixed interest rates, which are coming to the end of term, with new variable rates biting hard.
There are some initial strategies to consider to improve affordability.
Refinancing can be one option to assist in managing a more affordable repayment regime, especially in the short term. If you are playing a long game, then rent increases as lease renewals become due, can bring in additional income to cover rising costs.
Many investors are choosing to sell while the market is steady and potentially reinvest when the rates are lower, to relieve pressure. Traditionally, real estate has served very well for investors in the long term, however, if affordability is an issue now, you can always sell now and come back into the market later.
If you would like an appraisal on your investment property, give Leanne a call on 0408 128325 and she can have a chat with you about the marketability of your investment, strategies to sell for the highest return on investment in the current market, and timing your sale. Don't forget, we also have a large database of investors looking for their next property.
You may be surprised at what your property is worth in the current market!