Philip Lowe says he feels the pain of Australians struggling to come to terms with yet another interest rate rise, advising those experiencing mortgage stress to make the tough call and inherit extra money.
“That’s a lever you might need to pull to get back into a positive cash-flow position. A lot of people I know have used this strategy successfully. Yes, it can involve a bit of annoying paperwork, but that’s something your personal assistant will just have to deal with, I’m afraid,” he told a banking summit yesterday.
Lowe said there were other measures Australians could take to cope in a higher-interest environment. Here are his top five tips.
1. Sell off one of your investment properties:
Lowe says: It’s a tough call to make, but now might be the time to slim the portfolio down to single figures, at least for the short term. A couple came up to me just yesterday and said they were having to make the choice between paying for food or paying the electricity bills, and I said ‘Why don’t you liquidate one of your rental properties?’ Which is something I don’t think they’d even considered.
2. Get a tax-payer subsidised loan from the RBA
Lowe says: I got a cut-price interest rate from the RBA and it really helped me buy that five-bedder in Randwick. It means I’ve been able to pay off the mortage really quickly, so I don’t have to worry about increased interest rates at all. I’m pretty sure these special rates are available to everyone. Or maybe it was just me. I can’t remember.
3. Become the head of a central bank
Lowe says: It’s a strategy that’s certainly helped me over the years. Getting a $1 million salary is something I’d recommend to anyone who’s struggling to pay the bills.
4. Cut back on luxuries
Lowe says: When things are tough you do need to make sacrifices. We only open a bottle of Grange once a week now.
5. Sell some children
Lowe says: I’d never do this myself. But some people in the lower classes may need to consider this strategy in order to get back to positive cash-flow. There’ll be some short-term pain, yes, but remember we do need to get that pesky inflation rate down to within the target range!
