David Whitburn

Some investors I am talking to are starting to panic, yet many others are rubbing their hands in glee, like me.

RBNZ puts OCR to 8.25%

The Interest rates are rising again – big deal.  Come on you can’t tell me that you didn’t expect this to happen.  Many economists are now wondering whether they are going to rise one more time or if the Official Cash Rate will stay at 8.25%.  In my opinion whether the OCR stays the same for a while (eg 18 months) or goes up a little, perhaps another 25 basis points to 8.5% it really doesn’t matter.

Don’t just shut up shop and get consumed by the fear of greater Interest rates.  I have said this before and will say it again, but when the going gets tough the tough get going.

Opportunities

That said if investors and property owners continue to feel the pinch, believe the media and anti property sentiment (eg adverts by asset rich fund managers and other lending institutions) then there will be bountiful deals ripe for the picking.  I would advise having enough funds and resource on hand  to take advantage of great deals that are liekly to have big chunks of equity and/or significant cashflow in them.  deals that extremely seldomly came up over the past couple of years.

I really don’t care if the Interest rates go up much.  I adopt a weighted Interest rate averaging strategy and trade properties to pay down my principal, to reduce my Interest expense.  In addition I use revolving credit accounts wisely, as a buffer.  It works really well for me.

Already the number of Mortgagee sales is going up and many over stretched investors and home owners are feeling the pinch with their fixed Interest rates coming up for review and being around 2% higher.  Whilst it is obviously very sad that some people are faced with foreclosure, that is not the person offering to purchase their properties fault.  You are helping them out – you may just save them tens of thousands of dollars from a real fire sale, and their credit rating being destroyed.

This represents opportunities for smart analytical investors – if you are not too highly leveraged, then be ready to take them.

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