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In Everyone’s Best Interest

By Rupert Truscott-Hughes on August 22, 2013 in Other

Photo: Glenn Stevens

Photo: Glenn Stevens

It is with great interest that I analyse the issue of interest in this interesting city in which we live.

You see I’m hoping that interest rates will in fact increase, a view that seems to go against the grain of the greater community in this great country.

While many of you may look at me with my big house, fast cars and slightly extravagant lifestyle and label me greedy, I beg to differ. I live well within my means, have worked hard to ensure that those means afford my lifestyle, and I have money in the bank (and other investments) that is always there for a rainy day should the shit ever hit the fan.

I have never put myself in a position where debt could one day get the better of me. But it seems that I am in the minority.
The availability of cheap money has done nothing to reduce the cost of housing in this great city of ours. Australians are greedily borrowing every cent they can and in doing so they’re forcing the price of property far above where it should be, just so they can “get into the market”. They also naively (and sometimes greedily) assume that the value of the property (or properties) they purchase will continue to appreciate and that interest rates – the price they must pay in order to borrow that money – will always stay nice and low.

So what happens if interest rates do go up? What happens if house prices fall? What if unemployment increases and all of a sudden you find yourself without a job and with no source of income, just a f**king big mortgage that is growing at a similar speed to which the value of the underlying asset is diminishing?

Some people will undoubtedly call me a doomsdayer or something similar but I’d suggest that I’m simply being smart. Cautious, yes, but in these uncertain times I’d suggest that exercising caution is smart.

I’m no spring chicken. I remember when interest rates were nearing 20%. I remember when people had to make an appointment with their bank manager, put on their Sunday best, and virtually beg to borrow an amount of money that is meager by comparison to what people today can get their hands on with little more than a few clicks on the Internet, a couple of pay slips and a bank statement.

I’ve got to admit, the real reason I want to see interest rates go up has nothing to do with my own personal wealth. When I look at my portfolio I’ll probably be affected both negatively and positively in fairly equal measures. Some assets will yield less, others more.

The real reason I want to see interest rates go up is purely personal. I want to be able to yell “I told you so” from the rooftops. I want the greedy and naïve to suffer in their collective jocks while prices go off a cliff.

You can blame the banks as much as you like. You can blame your financial adviser or whoever you get your ‘advice’ from. At the end of the day, the only person you can really blame is yourself and the sooner Australia realises this the better it will be for everyone.

Only then will the responsible minority who have worked hard, lived within their means and saved their money be able pick up their dream home for the pittance (by comparison) that it’s really worth. And when that times comes you’ll no doubt find a way to blame them and call them opportunistic vultures as you lick your wounds and count your losses.