I attended an event for the Melbourne Cup last week.
The general banter in the crowd was about the “hot racing tips”. I am not a racing expert and am the first to throw my arms in the air and profess I don’t have a clue! (I just like to sip on a beer and take in the atmosphere).
After returning home from the function having a pleasant afternoon my wife was watching the news. The other big news that happens on Melbourne Cup day was being reported – the meeting of the Federal Reserve bank.
Interest rates have been put on hold.
The prediction had been that there was going to be a cut. The reporter stated “Interest rates are hold which means no reprieve for struggling homeowners”.
I had to do a double take.
“No reprieve!” I blurted at the TV. My wife looked at me slightly puzzled thinking I had one too many beers at the function.
In a climate where interest rates are the lowest they have ever been in my lifetime – this is concerning for me. The news is reporting people are “hard done by”.
The reality is, rates will probably get even lower.
People are creating so many large borrowing commitments and the expectation is that rates will keep falling. But they are not.
Homeowners should really be basing their commitments on a much higher interest rates than what they are now. They will eventually turn around and start creeping back up again.
There should not the be the mentality of a “struggling homeowner”. If someone is struggling now, they are likely to have no chance when rates return to more realistic levels.
We actually want interest rates to go up. Falling rates are intended to stimulate the economy – a sign that things aren’t going so well. With them going down are also interest rates on deposits and bank accounts.
The mindset should be of “opportunity”. There is potentially an opportunity to put more money on the mortgage, make some other investments or just generally having a great time while you can!
The mindset should certainly not be around struggle (as the media would like you to think).
Because when rates go the other way, there may lots more struggle & pain.
If you need help in developing your abundance mindset, talk to Rothgard today!
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