Interest Rate Rises and You

Ben Crowther 0:02

Okay, so I think that's sort of, we've got most of what we're going to get out of that interest rate increase at the moment, and I appreciate you your time out. Because that's, that's great. What we want. For those listening out there, what we're planning on doing next, next month, is coming up. We've discussed it a couple of times on the podcast, and what we want to really reach out and do with you guys is teach you how to run your personal finances, like a business

Allen Chan 0:36

could be business as well, isn't it? Well, run your business like a business. Well, that's the irony, because some business owners when I talk to them, Hey, man, what's what's your, you know, financials? And they're like, oh, ask my accountant. But you're a business owner.

Ben Crowther 0:52

Right? That's, that's right, you should be aware of all of these things. And it goes to your personal or your or your or your business. If you don't understand where you're at, then you're never gonna get anywhere. That wasn't a bad analogy that

Allen Chan 1:06

always, always stay where you're at. Right? What's your question? Man love asking those. Yeah, go for it.

Ben Crowther 1:13

So I think I think, you know, tune in next week, next month, guys, same bat time, same bat channel. And we will, we will be going through, in my experience, the best way to, to run a business and and manage it, as well as Allen's insights as well. And really not just focus on budgeting, but also focus on what your goals are, what your dreams are, and how you can accomplish them through being clever with your finances.

Allen Chan 1:44

Yeah. Well, I mean, you mentioned about where you're at. I think the key thing is I know it's been recorded. When it's personal. I mean, you're touching into a topic, which kind of like, resonates with what I want to do with my legacy. Right, which, you know, I mean, I've got two daughters, beautiful daughters that I want to teach them the financial skills or the muscles that's needed to kind of when they're getting older, like they they can manage their finances. Well, right. That's kind of why

Ben Crowther 2:12

that's perfect. I mean, look, I personally have amazing parents, and they love me unconditionally. And I went to great schools and all of that. But it wasn't until I was in my mid 20s, that anyone ever tried to explain finances to me, and that was at that point. The napalm had gone off. It was it was, you know, so it became a it became a building rebuilding side of things. What I would love and same for my son. I just recently had this discussion with him. Yeah, he's he's 15. And he's decided that he wants to invest in shares stocks cryptocurrency, right? And I said, that's great. It's fantastic. And he goes, Well, I want to take a loan out, I said, No, no, not at this point, you know, a 15. He's only just getting got his first job, which I'm quite chuffed with. He's got his first McDonald's job. So that's, that's fantastic. But I also want to make sure that the mistakes that I made when I was a teenager, he doesn't make there's there's a million different ways to make money. You know, just make sure that you're not sacrificing your future to make short term gains.

Allen Chan 3:24

Well, I think a key thing relates to I mean, for those who've read a bit on myself, or the podcasts, I mean, yeah, giving them lending the money and investing, which I've done then, on some really crazy products as well. It's like, giving a 18 year old who's on the hills, a Ferrari or Lamborghini, right? It's just, it's just not the best thing to learn about driving. So the reason why I said that is because in my personal experiences, I kind of like, did that and bought some option products, which was six figures. And then in the course of one night, I remember I leveraged my parents home and lost six figures. And yeah, and that was, like, detrimental. That's in another podcast that I have. But it made me appreciate one thing. I mean, there's even times you think, like, Is this the end? Right? You know, like, it's quite crazy how finances and money and the reason why I did it is because my I grew up with parents that migrated from another country. They never had too much money, but I've always kind of like, you know, what is the secret sauce that you need to have? Right, so, a bit about my background, I worked at NAB when I was a graduate, but always wanted to be private banking, which I did after the graduate program and worked in the top 1% of clients, banking, some well known cricket stars and cricket is actually in some, you know, barristers and solicitors. But what I learned is not so much. You know what, how much you have. It's, it's mainly what you do with your money, how you manage your money. No, I mean, I had barrister's unfortunately, every Thursday I remember extending their line of credit or overdraft or whatever lending facility that they have, they earn a lot of money versus some other barrister, like, you know, that is smart with their money and their manager invested structure in the right way. And they're pretty well off. Right? So, I guess, yeah, I kind of like, tried to take the shortcut and learn a few lessons. But since then, that's what created my passion and this skill set, because my parents never taught me about money. In fact, it's probably on the other side of the example what not to do. Which is you said, like, you know, love my parents dearly and unconditionally. But the key thing is, you know, they're not the best, you know, experts to advise on finances. So hence, I think in whatever area you're studying, whether it's finance, business, marketing, so forth, just look at the experts that are getting the results and probably copy them is probably the kind of like not so good thing like high school uni days, it's, I call it in business modeling, right? We've got a model the good thing, if they're winning, then you do you do what they're doing. Exactly. And leads to my next thing, like you talked about winning, and Aussies love, like, you know, sports and today's actually weren't State of Origin The first game, so yeah, yeah. So I guess why am I talking about sports is because we talked about finances, and I think it's important to understand in business or even personal finances, you need to have a scorecard, right. I mean, tonight, we got Mirage playing the New South Wales, we need to know who's winning. So what do we usually look at bed when we're looking at who's winning? You look at the numbers you look at? In other words, the scoreboard. You know, how many tackles all the stats and stuff like that? Right? So, I mean, they go through that at halftime, I don't know who's the commentator, but they'll go through a there's X amount of percentage of possession. But my question to you now, as a business owner, how often do you look at your kind of scorecard? Like, you know, oh, boy, you know, friends, that used to be good, too, you know, like, Well, I

Ben Crowther 7:02

mean, me it's become, it's become critical. When I was younger, and I did, I started a business younger, and it went terribly. Like, not because I didn't have the skills or anything like that. But because I didn't evaluate what I was doing. I didn't set parameters that I needed to operate in. And I think when, especially when you're you do have a business. If you can vary, especially if you're younger, you can, or you've never had money coming in, though, in those amounts, it's very easy to lose sight of what your actual goals are, yes, straight away, you see that money coming in? You know, oh, well, that's my money. And you know, no, that's not your money. That's the that's the business's money. Okay, you need to, you know, and you need to set the parameters, and you need to learn how to operate within those. If not, then you're gonna get lost.

Allen Chan 7:55

Yeah. And then, you know, that could be GST, there could be wages, and so forth. So, going back to, you know, that percentage, which you're doing it religiously, Ben, which is a fantastic skill set to have is having a scorecard. So, you know, the business scorecard, unfortunately, when I ask, especially in lending, or even myself is, what's your profit and loss and balance sheet? So to some of the listeners Lose a Guy, what's the bloody balance sheet? Well, they the two important scorecards to show whether your business is doing well, or it needs some improvement, right. But the unfortunate fact when I talk to business owners is that they produce that document, what happens they look at it, it's, you know, they have a drink when it's in the red. But they also have a drink when it's in the grade of black. Right? So yeah, so I guess, because they don't know how to read it. So I guess, going back to the personal side, that's the same thing. Like my vision is to raise the financial intelligence when it comes to finances in general. And I want my two daughters when they're working, I'm sure we decide like, Hey, can they produce a profit and loss on their personal merit? And also their balance sheet? Right, and, you know, assets and liabilities? You know,

Ben Crowther 9:06

that's yeah, no, that's exactly right. And I think one thing I, I've always been a bit of an advocate for, and and, you know, actually really shouldn't be doing more about it is, I believe schools should be teaching apps, the basics. I went through business studies, I did all that sort of stuff. I walked out of that, after getting good grades, and knew nothing about reality.

Allen Chan 9:31

And you know, I did business as well. And I know like, they talked about sole trader, the different types, but you know, it was one thing, right, it is practical is what we're talking about. What is your scorecard in your personal merit finances, and also in a business because business just means it's another entity but producing a profit and loss and balance sheet, right. I mean, there is another scorecard that's quite important. It's the probably the cashflow side of things, but I won't talk about it because that's the simple I mean, one One book that really inspired me been when I was 18. And I was given a book by Robert Kiyosaki. And for some of you guys who know Robert Kiyosaki, what's the famous book? You probably know, Rich Dad, Poor Dad. Oh, yeah, of course. Yeah, yeah. So that kinda like, you know, shifted my mindset. And I think, look, sometimes when you take massive action towards the way that you want to needs that some of, you know Borg or distinction, someone tell you something like that mindset needs to shift. You know, before and hopefully, this podcast that we're doing, Ben, is that, you know, catalysts to for that change, isn't it?

Ben Crowther 10:37

Look, I hope so. Even if even a few people change their mindsets based on hearing our conversations, then, you know, we've done we've done our job.

Allen Chan 10:46

Yeah. And I think, look, if you don't have that scorecard, you asked where they're at, they don't even know bloody where they're at. So that's the challenge that we face. Like, I want to go somewhere. But hey, until you produce where you're at

Ben Crowther 10:58

lost in the wilderness with no compass. That's absolutely correct. Like, you know, you

Allen Chan 11:02

want to go to Bondi today, like, I mean, where are we at? Are we I mean, we're in this beautiful Bella Vista Hotel, but you know, is it north, east west or Washington. So

Ben Crowther 11:11

direction I'd be lost without.

Allen Chan 11:14

But I think look, this hopefully useful information in terms of, I mean, we talked about scoreboard, and you just need to know the scoreboard or your businesses or multiple businesses. But if your business owner, you're telling me that, hey, I don't know my profit and loss. And it's like, flying a plane? And I don't know, I mean, I haven't done it myself. Have you done that? yourself? Bet?

Ben Crowther 11:35

No. So hopefully, I'm still alive.

Allen Chan 11:39

But I mean, let's imagine we're in a plane. And, and we're in the cockpit, you know, flying. I mean, how many instruments are there? Right? I mean, there's so many different, you know, instruments, and this does this, right. And that's the same thing when it comes to your profit and loss and balance sheet in finances. It does tell you sense of inflammation. I mean, if you're in the red, they, they stiffly, good reasons, right. Why you're in the red, right? I mean, you're marketing man, right? Sure. I mean, if you're not doing enough sales and all your expenses, more than what you're making, I mean, are you going to make a profit? I don't think so. I don't know. So I think, you know, people have a drink when they're not making a profit, which is interesting. So I guess we need to get to the bottom of it. And really correct that, you know,

Ben Crowther 12:25

but again, if you if you're, if you're coming through, and you're looking at why you're not making profit, goes back to that band aid analogy, rip it off, figure it out, having a drink is fine. But you know, get off in the morning, and then turn around and try and find a solution?

Allen Chan 12:40

Well, I think that's the key. And we're gonna talk about it in future podcasts. I mean, in my business, I mean, multiple businesses that are profitable, but it's more around the mindset and the story that you tell us you tell you tell yourself, right. I always say like, you know, as a business owner, who's the biggest choke on the business, it's not your clients. It's not your processes. It's not, you know, the margin or what you're selling. It's what the business owner himself or herself, right? Yeah. Don't you agree? Yeah. So once you get that distinction in terms of, hey, what am I willing to let go of? Or what am I willing to change or implement more? Hopefully, your business gets better.

Ben Crowther 13:18

Yeah, I agree. wholeheartedly. Sorry,

Allen Chan 13:21

we just add, Alicia.

Ben Crowther 13:24

No, it was good. Very good. Okay, guys, look, we're gonna wrap it up for today. Thank you for listening. We will be back next month with what I'm thinking is we're gonna call it the scorecard. And

Allen Chan 13:38

I mean, we would know who's winning the state of origin.

Ben Crowther 13:44

So we're gonna try and have something we're gonna put something together for you for next month to help you run your personal finances and your businesses more effectively, and maybe come up with a way to give you a visual scorecard

Allen Chan 13:59

on it. Yeah, definitely. I mean, looking forward to Ben, thanks for your time

Ben Crowther 14:09

Okay, so Well, it can't be all dark and gloomy, what some what some positive things that we can take out of of this news that most people might not understand or sort of fail to realize.

Allen Chan 14:20

Well, I think I mentioned before, if the first home buyer, there may be better opportunities in negotiating a deal that you can settle on. That's number one, okay? Because everyone's afraid or not getting the price that they want, but if you're ready already pre approved in the market, you probably can strike versus like 20 people at a auction or or private inspection probably 12 months ago. Secondly, I still see investors getting ready so meaning what I see is that the ones that can do it is getting that cash out I talked about it the OPM other people's money. So getting ready with the equity in your home Again, purchasing an opportunity, I think when the rates are going up, people see, oh, it's costing a lot, but maybe they don't see they could be an asset that's returning good money. Now, this isn't our advice, I'm just saying, as long as the rental is covering the costs, right, and you can get into it, and you can write, there could be some opportunities that you can negotiate. Sometimes it could be something that you you negotiate, which you You're very good at being yourself, if you buy very low and, and it's returning a good range, and it covers other cars. Why not? So therefore, what I'm trying to say is do your research and do your numbers, right? Because the loan is just an aspect that has, that's how much it costs, it can change, you can be fixed, it can be variable, that's part of the game. But I think if you know the mathematics and and what's the buffer, what's the exit? These are the main questions we need to ask as a mortgage broker under the best interest, Judy. So I feel those of the opportunities are showing up. So the people that can do it, they're preparing for their next purchase. So you know, when people go, oh, when should I buy property? It's like, well, that people will say, hey, now or yesterday, but it's more calculated purchase. I mean, that's that's the key ID. So I feel we're busier than ever has a positive because we're helping more Australians work out their options, right, rather than Hey, they feel like they're stuck with that lender, which isn't the case. The other positive is that if you can refinance, we talked about that, and some lenders are offering $3,000 $4,000 Cash Back in refinancing. Now, there are some costs in exiting like could be. I mean, Mark talked about that yesterday, Mark borrows, probably around $1,000 In exiting, but if it's a $4,000 cash back, you're still $3,000 ahead. I mean, wouldn't it be great with that scenario, he said the repayment was 2500. We refinance. So the repayments is now 1900 plus 3000. Net in your pocket, you know, what would you do with that extra $3,000? Ben?

Ben Crowther 17:05

Yeah, well, I'm not going to go over and probably not talk about it on this podcast. Now, that's, that's great. And I'll tell you what, that that other people's money has worked its way into my vernacular within a month. I love that, that terminology. I've talked about it a couple of times now. And I mean, I've pointed out a few people towards that, that just that that section of the podcast, yeah. And it's, it's an amazing way to look at it. It's an amazing way to, to view how you're, how you're investing how you're looking out for yourself. using other people's money, I love it. I think it's, it's, it's such an interesting way to phrase

Allen Chan 17:48

it, but also like, I'm talking to businesses, and in fact, it triggered me, I'm talking to one of my mates, and he runs a very successful business. And I say, get the money, right, when not when you need it, get the money when you don't need it. Right? Isn't it that planning, right? We don't plan to fail, but we failed the plan. Right? I'm not saying he's he's taking massive action. And, and in fact, I think today he's loans being approved right for the business. And that's exciting news, because we can only cash is king, like they said in business. And I think like if we relate to our personal situation. I mean, obviously, for people that have built up that equity, because some have just gone into the property market and may still need to pay down their loan before they built that OPM. So but I guess the key thing is to ask, if you're not sure, it's good that we have this podcast, Ben, because it you know, it's not painting, always sometimes the rosy picture or the world's ending. And there's YouTube, there's so much resources out there. But until you really talk to someone that's an expert, and they've listened to what you had to say, where you're at where you want to go, then we can provide a valuable advice.

Ben Crowther 18:58

I think that's, that's, that's true. I mean, I was looking at some, some of the media pictures that they have painted over the last couple of days, in preparation for today. And some of it's pretty grim. But I think people need to realize that bad news sells better than good news cause and taking a negative spin on anything. Is is going to sell more more news, you know, a love story doesn't sell but a war does. So, you know, I think people need to be aware of that, that the these people are not writing media stories in order to help you most a lot of the time they're writing it because they're running a business as well. And you know, you know, bad news sells better. Yeah, but I think those of SEC sells.

Allen Chan 19:53

It does but I mean, you know, loans unfortunately rates it's there's just a mathematical formula right now. But I think if you may go, hey, 30 years, 25 years, by the way, explain it's all factual, it is a reduction in your, you know, monthly repayment. But importantly, if the repayment type, like I said, principal and interest, and I won't go into the detail right now versus interest only, it just wants you understand that concept and even OPM, like, you know, I have clients like that, yes, we had an increase, it affects everyone, right? I mean, even myself, right? On my verbal loans, but if someone's got a cash out, or OPM of a million dollars offset in their account, like would they be even concerned about this? Right? I guess not. Right. So therefore, that's what I'm trying to say like, you need to plan and weather the storm, right? There is one. One thing I learned from my mentor, you know, Uncle Tony Robbins, right. It was like, you know, winter, you know, he always talks about winters here. And I think like, after the two rate increases, if you make it mean that, hey, winters here, my question to you is, are you going to freeze to death, or you're going to you plan well ahead, and you're going to snowboard and ski through the slopes? You know? So that's a great analogy. So I think the mindset is quite important, and the story that we tell ourselves, but more importantly, if you the story doesn't paint a good picture, what are you going to do about it? That's my bottom line.

Unknown Speaker 21:19

No, I think that's yeah, exactly. Right. And then I think these days, there is absolutely no excuse for not being well informed. You know, I said that I came across some some negative negative articles while while researching for today, but in order to sort of counteract that, I tried to find some positive outcome positive about this news. And there was there was a plethora of information about suburbs that what places are going to thrive through this where it is best to invest? Yes. And like I said, it's all math and mathematical formulas. There are formulas that will that figure this out. And it's just a matter of going out there having a look at that information and seeing if that that is right for you.

Allen Chan 22:03

And also sometimes Ben, when we do say no, it may be like into the mortgage or something or you're not ready yet. It may be the best answer ever, because you may not be ready at this stage, right. And there are some people that we have inquiries where they go, they want to buy their first home, and they want to be a million dollar mansion, but they really can't afford it. And we have to tell him like, you know, I didn't start off with a million dollar mansion, right? You need to buy something that you can afford. Right? I

Ben Crowther 22:30

think that's a hard truth. And I think people need to, okay, everything. Everything's been riding so high for so long. Yeah, sometimes, you know, people need to be pulled back down to earth a little bit and just go, guys, just calm down.

Allen Chan 22:44

And I think lastly, is what you can do, like interest rate, I can not control Ben you can't control. But you know, what we can control is like, you know, do we seek some help and, and put our hand up, right? I remember that school like, hey, I need some help. And there's always people around. And I think in Australia, like it's a great environment that there's so many experts, you're right, you've got access to so many information. But I think that organization of those information is quite critical. So I think you mentioned digital shepherds. But I think if you were to talk to me, all different clients talk to us, we can go Hey, where are they at? What did I need to go hate step? 123. And ABC.

Ben Crowther 23:21

Yeah, exactly. Right. And I think that's the, on the flip side of there being so much knowledge is without someone to sort of go, Hey, this is rubbish. This is correct. It can you know, all you have to do is scroll through Facebook and, you know, your Facebook feed to see how much information out there and you just go Oh, really? So it's it's a double edged sword, isn't it? You know, if you've got someone who can guide you through what you should be listening to and what you shouldn't. But I also, I still think that there's no reason that anyone in this day and age shouldn't be should be uninformed about any subjects that they're interested in.

Allen Chan 24:02

Absolutely. Because they can access it so readily available isn't a

Ben Crowther 24:05

little bit of Duck, duck, duck go or a little bit of Google, you know, I'm pretty sure I know the age of every celebrity that's ever interested in me just simply because of Google.

Allen Chan 24:20

But I will be when it comes to finances could be quite personal, and in fact, could be emotional topic. So I think it's about you know, speaking to an expert who's walked the road or helped many people walk the road to kind of like, listen to your situation and, and see if we can help.

Ben Crowther 24:34

I think that's that's exactly right. I think people become terrified of these big nameless corporations and banks and things like that. And they think there's going to be judged for you know, that I've mentioned before, you know, the actions that I've made when I was 19. And still annuity. I would hate someone to look at that now and go, I won't now at 35 and people go well,

Allen Chan 24:56

yeah, but wouldn't be great if we can help some people. Like, you know, avoid him doing something.

Ben Crowther 25:02

The best thing I ever did was go to a financial planner. Yeah, and turn around and go, Hey, this is what I did. And I went, Yeah, that wasn't great. But moving forward, right? You're 19 you're, you're an idiot. You're 19.

Allen Chan 25:17

Why call out?

Ben Crowther 25:19

Quantity? I'm just so general. Most people would look back when they're 19 and go, Oh, those decisions that I made.

Allen Chan 25:27

Sometimes he you know, the truth will set you free. And

Ben Crowther 25:32

I like that. I like that a lot. All right, well, give me two seconds. I'll be right back. Sorry, they Hi. I managed to cough myself into oblivion. So what do you think the long term effects of what we're seeing now will be? I mean, the short term ones, obviously, increase in mortgage payments, pressure on people, but also a direct decrease in the housing market? What do you think the long term effects are going to be? On a decision like this?

Allen Chan 26:08

Well, I guess we need to, it may be too long to tell Ben, because we were just being what a few months doing this? And how many changes has there been? So there's so many variables that that will, you know, really say what the long, long term effects are. But I think it's going back to if the rates increasing, like from a less positive perspective, the repayments are going up. That's, that's inevitable. And we need to buffer for further increases. So it's really reminding clients, so make sure you have a good solid budget. We talked about Uber and other stuff, like some things may not be as frequent, as you know, two years ago, when it's like, easier cash and access to that, right. For the positive size more the first homebuyers that kind of like, couldn't get in the market, maybe there's more opportunities there. Right. So but if it continues to increase, obviously, it will have long term effects, like people not buying properties, right. And, and we talked about the I mean, I know some of the questions, you're gonna ask, what are the renters? Right, that don't have a mortgage? Right? So potentially, if a landlord owns that property, and they feel that there's pressure, whether it's an interest rate payment or costs, then you can see them increasing rents to go up? I mean, I'm not saying right now at the moment, but it depends on the market. Right. So if it's a similar property, we're all feeling the pinch, that landlords are increasing their rents. And then from, you know, let's say it was $400. It could go up. Right, because the cost is need need to be resolved by the landlord.

Ben Crowther 27:43

Yeah, for sure. I think that's a Yeah, that's a good observation. I think that the the longer this goes on that the more pressure is going to be put on to those, those renters as well.

Allen Chan 27:57

It affects everyone, it affects everyone. Yeah.

Ben Crowther 27:59

I mean, some people couldn't be going from, as we talked about positive being positively geared to negative good overnight.

Allen Chan 28:06

Yeah, I had a client that said something to me along those lines today. But I guess, you know, also going back to structure like I would ask, is that loan principal interest on an investment? Can that be done on interest only as one of the factors can be, you know, reduced into the loan amount? So there's a lot of questions that we can we call it rejigging or restructure. This is, I think the key word moving forward. Yes, rates are going up. But you know, do you have if you're owner occupied listening? Like, do I have a lot of redraws this mentioning to the guys like, can that be like structured as an interest only that you get access to that redraw? And then the remainder of the owing could be restructured as a principal and interest loan to pay down the debt? Certainly, I've seen that with some, you know, I, some of the places I've worked with, like in private banking back in one of the big fours like structuring is a key thing. So I think like, clients are under the assumption that, you know, we talked about set and forget mortgages, they think that if we go with a lender for 30 years, that's the lender that you're stuck with. But I think we choice, and then the internet and technology, I mean, you can move and change pretty rapidly and quickly. So I guess you know, what's preventing people who are doing it? One thing I don't want to say, but it could be laziness, right? It is. I'm just being honest. But it can cost time. Right? That's that's the sort of things

Ben Crowther 29:32

Yeah, I think in that regard. Yeah, laziness is but I mean, laziness effects everyone's part of every. I mean, you know, I could go to the gym every day, but I don't. But yeah, I mean, that's laziness. And I think I think the that uncertainty we've spoken about before, is also part of that where people are unconscious. about what they're doing, therefore, they don't they. It's like, it's like tracking your credit score. When you know that you you've done some bad stuff when you're younger. Yeah, it's, it's once you rip the band aid off and you do it, you're usually pleasantly surprised. But if you if it that sort of fear of the unknown, that you're going there, it's the same sort of thing. You don't want to go into a bank and make things worse, by or so. I mean, I guess this is where, you know, people like yourself come in, and can and be those digital shepherds that we we've discussed before, you know, guide people through that process and also understand what's happening on a broader scale, within politics, finance and things like that, that can help people that the average Joe probably doesn't understand or or want to understand.

Allen Chan 30:58

Well, I think firstly, you know, our vices free, right? I mean, and you might go, Well, if it's free, then how come? You know, other people don't provide it? Well, secondly, if it's free, like, we've walked the roller as he is this person done the stuff that I need to, are they an expert? How many transactions have they done? Like, this is our bread and butter? So we do that all the time? So I think it's that story. I mean, you talked about that band aid in ripping it off, or your credit score. I feel even before that, it's getting through that, what's the story? You're telling yourself? Right? I mean, you associate so much pain in the story in terms of ripping it off, right? I've never had that analogy, by the way, but it's a really good one. In taking massive action, I mean, if they want to see the future, or better one, I mean, obviously, that's the first thing to fix it credit. Now, that's one of the many scenarios Ben of course, but I guess if you're in that spot where you feel, I'm not sure. Should I talk to the bank? Or firstly, talk to a mortgage or it goes free? Right, what should I be doing? I already mentioned some tips like go back to your bank and ask for a better one, right? better interest rate, I'm talking about lower the interest rate, if not come see us. Can we restructure it in a way? Can we reduce the loan repayments? There's so many things we can do. Ben, so depending on that person scenario,

Ben Crowther 32:12

yeah, no, fantastic. I mean, that's Yeah, perfect. With I guess, leading into that there, there's going to be a lot of people who are feeling that financial strain it I guess, what are some positives that you can

that are out there other than just refinancing? And we are good to go. On recording in a new studio today. Beautiful. Not over zoom, where I sometimes end up looking like a Minecraft character because my internet's terrible. Yes, I get the Minecraft references because I have a 14 year 15 year old son now.

Allen Chan 33:02

You go. But

Ben Crowther 33:04

okay, so lots of big things have happened over the last couple of days.

Allen Chan 33:09

Yes. Doesn't stop does it? It never.

Ben Crowther 33:12

It never stops. But the one that's at the forefront of my mind at the moment is the Reserve Bank choosing to to raise it by another point 5%. And that has been getting some nonstop coverage at the moment. What what do you think sort of drove them to to make that increase? Well,

Allen Chan 33:41

I think the chairman from the RBA was commenting. We had pretty high inflation, given the pandemic interest rate got low. And people started buying and went into a frenzy. Like if you were to talk, talk to some of our clients talk months, 24 months ago, they're probably struggling to get into the market. So it was just too hot where RBA needed to do something and obviously, that's one of the bases that they based it on. And it came a bit of a shock that it was point five, to be honest. I was expecting a bit less,

Ben Crowther 34:18

especially after last month going up by 5.25.

Allen Chan 34:21

Yeah, so I guess sometimes when when people read it, like it's point eight, five and and just to correct that it was two months ago at 0.1. That's the cash rate. But then it increased 0.25 Last month, so 0.35. And then yesterday's announcement is point five, therefore, the cash rate now is 0.85. Because I get clients like oh, it's increased by 0.85. But that's as a result. That's where the cash rates sitting. So it did increase by 2.5. Still a lot in you know, most people who who's a mortgage owner right. And they would have impacts if you On a variable interest rate your repayments.

Ben Crowther 35:03

So do you see this happen? Well, you seem to mention, indicate there that that it'll be have some positive ramifications for people trying to get into the market. But it could be detrimental to those people who have multiple mortgages at the moment.

Allen Chan 35:19

Well, definitely the repayments would increase. But I think like, if you went through a bank or mortgage broker, they would have buffered some of these increases, not the best that we'd like, because it's going up. So you're paying more. But I guess in terms of, oh, you know, the world's ending, I can't afford my mortgage anymore. Right? Well, the bank factoring, I think we mentioned in our last podcasts or, or gathering or zoom, they factor in at least 2.5% of an increase, right? So I mean, yes, nowadays, probably the lenders are rethinking Is it a 3%, buffer, and so forth. But I feel there are a lot more. If you talk to a mortgage broker, or someone that's a bit more expert, you can restructure loans. And I had, I was watching the news and Mark Buress, came along and talked about, you know, you just got to take some action. And you can't just leave it in terms of the bank's hands. And we talked about loyalty tax before, right. So you really got to look at what am I getting? Is any like, you know, choices? And can I restructure? Those are the questions that we constantly need to ask ourselves, right, because it's not going to be fixing and low forever. That's that's the bottom line, isn't it? Well,

Ben Crowther 36:34

that's yeah, we discussed this early on, which was, there's no such thing as a set and forget mortgage. Yes, I think that's very important. So I think, you know, for any of those people out there listening, who are who are panicking, don't panic straightaway. See what you see what the options are, evaluate, there is always light at some sort of tunnel, and you just gotta get, make sure that you're taking the right steps. Well, we'll

Allen Chan 36:57

talk talk to an expert, right? I mean, if I was to relate back to the pandemic, like, if you've got a cough and flu light or something like, you're not assuming that, hey, you got COVID, and you're going to die. First thing is talk to your GP or like, I mean, it gets worse, you got to talk to an expert and see and what what it is right. So there's definitely a lot of media coverage, no doubt. But everyone's circumstances is different then. So I feel we need to do that firsthand. I even did a even on my kind of like business profile, some question and answer. First thing is go back to the banks. Ask them if you can get a discount. Well, don't ask you don't win bed.

Ben Crowther 37:37

If you don't, my mother always has a saying if you don't ask you don't receive a Yeah.

Allen Chan 37:42

So I think I think that's to eliminate that loyalty tax. But if they said No, they won't budge, that's when you kind of like, need some someone like us an expert to kind of go through is there other options, and I want to talk about it here, because it's about restructuring the loan. I mean, Mark talked about it in in the news yesterday, how, you know, some people may be on, you know, 3.5 and percent into the interest rate, and we've 25 years to go. But if we were to refinance, your repayment gets reduced to I think, you know, 1900, it did have those figures. And that's probably what we'll do, like put those figures or, or that link to the articles, so people can refer, then then basically, their monthly repayments got reduced. So by by taking some action,

Ben Crowther 38:26

and it's up to each bank, if they're going to pass what they're going to pass on, how much of that increase or because, you know, I know that they don't always pass any decrease on but it is up to each bank, isn't it to to come to their own decisions,

Allen Chan 38:44

it will be interesting to see in the next few weeks, and no doubt already, where in our brokerage, we're seeing, we're seeing a lot of clients email ringing and and obviously get, you know, can we refinance or do something? I'll take massive action, basically, yeah, what were you we just mentioned before, however, the banks have been set the increase, some may be passing the food, some may not. So it takes a bit of time to adjust in the next, you know, seven to 14 days, it will be interesting to see what the environment will be like, like later on, then we can kind of compare, hey, what's the cheapest? And then what's the most expensive and so forth?

Ben Crowther 39:22

Will there be some sort of delay now with any loans that are going through because something like this happens? And the banks, they they need to especially the big four, they're going to have to reevaluate what their rights are, aren't they and then before they move things forward, is there is any sort of hold up over there or delay?

Allen Chan 39:41

Well, that in terms of passing the full increase, I think, I just saw I mean, Westpac passed that on straightaway, right. So, I mean, they are very quick to act when it comes to right increase, but when it comes to a rate decrease, it may not be as quickly for the savings. have mortgage owners unfortunately. But yeah, in saying that if people do have approval, if you're variable basis, there's a chance that it can go up when you settle on your property or your home loan. If you fix and you take haven't taken a rate lock option, that could be at risk as well. So these are people who've got a pre approval or an application going at the moment. So that's where we're kind of trying to inform our clients that, hey, something to be aware of, for example, some of the risks potentially, if you're pre approved, like your borrowing capacity is x, because the rates increase their borrowing capacity may reduce. So these are the things that you may need to go back to your bank or or broker just to double check. If the rates and affordability is the same.

Ben Crowther 40:48

Yeah. Okay. So is this, this is going to help? You said slow down that that housing boom? Well, I mean, I can't remember there not being a housing boom, I spent with particular in, say, New South Wales, housing prices have pretty much increased steadily since forever. And now I'm seeing that they're expecting the average home will decrease by 7%, over from 2022, which was as QM was predicting that? Well, I think that that's a that's, that's, you've sort of hinted at before, but that might be an artificial way of slowing that that bubble.

Allen Chan 41:29

It is, but I guess, good things to note. And it's not always a best indicator, like I mean, the fixed rates. Now, if you were to look like a few months back, or probably six to 12 months back, that was sitting probably at twos, right having you can lock in. I mean, especially, I mean, I locked in my four year rate at a particular bank, for one point, I'd like those rates were gone. Because if you look at a four year rate, which I've got something pulled up at the moment, one of the lenders is offering 4.39. So it's just moved so quickly. Right? So therefore, what I'm suggesting is to really have a look at what the fixed rates are doing. Right, could be a reflection of how the interest rate movements gonna be right. So, you know, is it going to be seven? I mean, I don't see any fixed rates at seven at the moment. But there is talks of further increases. And I guess it's more, again, restructure review. Look at if you can get a better rate. That's that's the whole ID. Yeah. What could be worse, we could be in America. Yeah. So now I think other countries have increased over 1%. Right, in terms of their interest rates. So I mean, their inflation, certain countries are double digits. So I mean, they have to do something drastically to slow that down. And I guess the other thing to add is, the access to money was quite cheap, Robbie, during pandemic days, whether it's for businesses or with interest rate at 2%, and a buffer rate of two and a half or three, which means it's four and a half to 5%. People got a higher borrowing capacity than before. So I think in anything you do, it's important to look at buffers or, which is what we asked as part of best interests. If you have that, then you can weather the increases, right? That's the key ID

Ben Crowther 43:17

other than mortgages, is there any way that this could this is going to impact everyday Australians?

Allen Chan 43:22

Well, I guess the key thing is just the repayments is going to be higher unless you're fixed, right? So it's really it, it will affect their household budget, no doubt. So it's really reviewing a you know what else? You know, is it that extra Uber Eats you choose not to get right those sorts of things. We need to start factoring and having a think about because you're not going to be like behind on your mortgage. So some things unfortunately, may need to give right so yes,

Ben Crowther 43:53

yeah, I guess it's a it's an odd time for Australians, but it's on time for the Western world at the moment with oil prices and the cost of living going up.

Allen Chan 44:02

There's definitely a pressure there's no doubt we've even petrol prices increasing and that they're drastically even though there was a bit helpful that from the government, it just we're feeling that pinch along with the mortgage repayments, isn't it?

Ben Crowther 44:16

Yeah, well, hopefully now that everything's starting to well, hopefully settle down a little bit within the Australian political sphere now. Hopefully things can even out a little bit. People get used to the new the new the new boys or girls in charge and see, see where the lay of the land is in a few a few months?

Allen Chan 44:38

Yeah, definitely.

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