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April 17, 2020

Why We Love Lower Interest Rates

Why We Love Lower Interest Rates

Why Property Entrepreneurs Jump Towards Lower Interest

“Achievement seems to be connected with action. Successful men and women keep moving. They make mistakes but they don’t quit.” – Conrad Hilton

Every successful property entrepreneur knows that the objective of an investment is a high return. A great investment is often measured on how much money can be economised, and the size of the risk attached to it. When it comes to a lower interest rate, investors often jump on the opportunity to save money.

Let’s take a look at how interest rates affect investments:

  1. Given our economic climate, lower interest rates could encourage additional investment spending, which will give the economy a boost in this time of slow economic growth.
  2. Interest rate fluctuations could also have a large effect on the stock market, inflation, and the economy as a whole.
  3. Changes in interest rates affect the public’s demand for goods and services, thus aggregating investment spending.
  4. A decrease in interest rates lowers the cost of borrowing, which encourages businesses to increase investment spending. Lower interest rates also give banks more incentive to lend to businesses and households, allowing them to spend more.

Overall, lower interest rates increase investment, because lower rates decrease the cost of borrowing and require investment to have a lower rate of return to be profitable.

“Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” – Dave Ramsey

What does this mean for you as a property investor?

Performance is linked to interest rate changes and economic growth as well as many other factors, including:

  • The property fundamentals of shops, schools, and transport links
  • Schools,
  • Transport links,
  • Major employers and a major investment
  • Population growth and the demand for homes.

The link between interest rates and property prices is harder to determine than for other assets. If rates are decreasing because of a weak economy, property prices are probably decreasing too. If interest rates rise gradually, the impact on investment markets could be muted.

The faster and higher they rise, the more impactful they will be. However, that impact won’t be evenly balanced. Some assets will be affected more than others, but unlike with other investments, the property investor is in control of his or her own fate. With the right strategies, you could increase your profits in property investment when interest rates rise.

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