Seven ways low interest rates help stretch your money

Taking the time to consider how you can benefit financially in a low interest rate environment is a great way to strategise for your financial future.

Here are seven ways low interest rates can help you make money.

1. Rule out credit card debt

It's simple but powerful. If you have got money available to drawdown, pay off your credit cards as the interest payments are higher on these than currently on your home loan.

2. Be interest rate savvy with your term deposits

Just because the rate of return on term deposits may be lower in a low interest rate environment, doesn't mean they should be ruled out altogether from your wealth management strategy.

Research different types of accounts, like online accounts or term deposits, and see if you can find a better rate if you commit to investing for a set period. If it seems unlikely interest rates might rise in the short-term and you don’t need immediate access to your money, you’re likely to be rewarded for your loyalty.

3. Use freed up cash flow to build wealth

Why not use the cash left over from mortgage repayments to build an investment portfolio to increase your wealth management footprint. For as little as $100 a month, you can contribute to an investment portfolio that invests in a range of asset classes that over time will grow your wealth.

4. Use the money set aside for mortgage repayments to pay off some principal on your loans

Getting ahead on your mortgage is a great financial strategy, and easy to do if you are already in the habit of paying more than you need to cover interest repayments. So keep your repayments at their existing higher level while interest rates are steady or dropping, and you can knock years off your mortgage.

5. Consider fixing your loan

In an environment where interest rates look set to be low for a long time, you may want to consider fixing the interest rate on your home loan and lock in a low interest rate.

Although no-one knows exactly what will happen with share markets and the economy, it’s fair to say in times like these, where global governments are implementing extraordinary stimulus packages to protect their economies, you can have a certain level of confidence that interest rates will remain low for some time until there’s a sustained period of recovery.

By fixing your home loan rate, you may have a better handle on your finances each month and be able to budget effectively for your other living expenses.

6. Improve diversification and protect yourself when interest rates move

By investing outside of cash alone into other asset classes, you will improve the exposure you have to interest rate movements and improve the diversification in your investment portfolio.

7. Consider fixed interest managed funds

These funds provide exposure to the full range of fixed interest environments, adding better diversification benefits to your investment portfolio, exposure to potential upside while helping manage any downside.

Next: Four steps to help you protect your income

Many of us don’t hesitate to insure physical assets such as our home, contents and vehicles, but what about our greatest asset of all – our ability to earn an income?
The financial resolutions you make with a clear head in July are far more likely to create a champagne future. So let’s #GetMoving with some smart money habits.
We show you how to find the ideal investment property that could deliver both capital growth and decent rental income to finance your post-work lifestyle.
Salary sacrificing into super is effectively a long-term wealth strategy that may help to grow your retirement savings over time. We take a look at how it works, the benefits and some things to consider.

This Information is current as at 18/08/2020.

BT - Part of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not constitute financial advice. It has been prepared without taking account of your objectives, financial situation or needs. Because of this, before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. Information in this blog that has been provided by third parties has not been independently verified and BT is not in any way responsible for such information.