News

Got equity? Perhaps you need a line of credit…

Tue, 17 Jan 2012

It’s a nervous time around the world as we watch Europe’s continuing debt woes unfold. Financial instability could well mean that a credit squeeze is looming, both overseas and closer to home. While everyone hopes for the best, investors should prepare for the worst, according to Gavin Hegney of Hegney Property Group.

This means anyone with equity in their property right now should be obtaining lines of credit. In other words, now is a good time to have some cash in your bank account in case those bargains appear next year. This is because getting loans might soon become much harder, but those with cash will have plenty of buying power.

“You won’t be competing against other buyers if the worst case scenario does happen,” Hegney says.

“It’s just a huge opportunity for those that have lines of credit in place.”

He adds you can draw a line of credit, then put it into a deposit account and offset it against your other loans, so it won’t actually cost you anything.

“Those who have the money will be able to buy assets and anyone in a position where they can get credit today should do so. It’s a strength to be able to borrow.”

Hegney points out there’s been a lot of talk about interest rates falling and whether or not now is a good time to lock in interest rates. However, the risk of a credit squeeze, if Europe’s economy falls apart, should be what investors really focus on.

“The risk to Australia isn’t the price of money or the interest rate, it’s the availability of money.”

It’s also important that investors don’t panic in the current climate, he says. In fact, some banks are now offering interest rates around six per cent, which is “an absolute bargain” according to Hegney.

“The RBA (Reserve Bank of Australia) never drops interest rates just once, so I’m expecting interest rates to fall 25 to 30 per cent over the next 12 to 18 months. It’s likely rates will reduce by at least one per cent, that’s the normal behaviour of the RBA. They never drop interest rates just once.”

 

Australian Property Investor
Australian Property News
www.apimagazine.com.au