• TFC Financial

5 Ways to Benefit from Record Low Interest Rates

Interest rates have never been lower, and it’s possible they might fall even further. This creates opportunities for householders and businesses, so how can you best take advantage of low interest rates?


1. Pay off your debt more quickly

By maintaining constant repayments as interest rates fall, you’ll reduce the time it takes to pay off your loan. That’s because interest will make up less of each repayment, with more going to reduce the outstanding capital. And the great thing is that to take advantage of this strategy you don’t need to do anything. Lenders usually maintain repayments after each drop in interest rates unless you instruct them otherwise.


2. Refinance your home loan

Lenders vary in the extent to which they pass on cuts in official interest rates. So if you want to reduce your loan repayments it might be worth shopping around to see if you can find a better deal from other lenders. Just make sure that, if switching lenders, you take all fees into account to be certain you really are saving money.

If you are restructuring your borrowing another thing to consider is fixing the interest rate on all or part of your loan. This can provide protection from the impact of rising interest rates in the future, though it may mean you benefit less from any further cuts in rates. However, with interest rates already very low, there simply isn’t the room for rates to fall much further.


3. Buy a first home – or upgrade

Low interest rates create opportunities for first homebuyers to get a toehold in the property market, and for existing homeowners to upgrade to a bigger home or better location. While lower interest rates can be a bit of a two-edged sword, as they tend to drive up property prices, most people are happier borrowing in a low rate environment rather than when rates are high.


4. Borrow to invest

While Australians love to invest in property, borrowing to invest in shares is also a viable wealth creation strategy. Often referred to as gearing, the key to successfully investing borrowed funds is that the total returns must exceed the total costs. As the most significant cost is usually the interest on the loan, low rates make this strategy more attractive.

Take care, however. Gearing can magnify investment returns, but it can also increase your losses. It’s therefore important that you fully understand investment risk and how to minimise it.


5. Expand your business

The whole point of a reduction in interest rates is to stimulate the economy, and that includes encouraging business owners to invest in their enterprises. Low interest rates make it cheaper to borrow to buy equipment to increase productivity, to take on more staff, or buy out a competitor and generally expand the business.


Take advice...

Some of these strategies are simple ‘no-brainers’. Others involve significant levels of risk. To take a closer look at how you can make the most of low interest rates, talk to your financial adviser.



Toowoomba Financial Centre Pty Ltd ABN 88073088070, trading as TFC Financial is a corporate authorised representative of Charter Financial Planning Limited ABN 35 002 976 294 Australian Financial Services Licensee License number 234665. This article contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making any strategy or product decision.

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December 4, 2018

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Toowoomba Financial Centre Pty Ltd ABN 88 073 088 070, trading as TFC Financial is a corporate authorised representative of Australian Financial Services Licensee 234665, Charter Financial Planning Limited ABN 35 002 976  This website contains general advice only. You need to consider with your financial planner, your investment objectives, financial situation and your particular needs prior to making any strategy or products decision.

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