What happens when interest rates head up?

IF interest rates start to increase, do you expect any change in property prices in the short to medium term?

Any increase in interest rates would mean mortgage repayments would rise, which then puts pressure on household budgets. Meanwhile, people buying properties would also find it harder to qualify for a loan.

These factors combined would put downward pressure on property in general, but of course the effect on an individual property would depend on its location and price range.

The pressure would be less for investors as the interest on their loans is tax-deductible.

I HAVE a loan facility with my bank which enables me to borrow on just about anything and I have used an amount for a wedding and to purchase two cars. How does Centrelink regard this in the calculation of assets?

A departmental spokesman confirms that money a person spends is not prima facie assessable under the social security assets test. However, where a person purchases assessable assets, such as a car, the car is assessable as an asset for assets test purposes. Assessable assets include money, shares, financial investments, investment properties, vacant land, holiday homes, motor vehicles, caravans, boats, household contents, personal effects, businesses, farms and other personal assets.

For social security purposes, the value of an assessable asset is its net market value. The net market value is the amount the owner could expect to receive if the asset was sold on the open market, less any allowable charges or encumbrances.

I NOTE you suggested that a rough guide to the amount needed for retirement is a capital sum of 14 times planned annual expenditure. What age is this for?

Is there a table available on the internet that would provide this information?

There is no simple answer because the amount a person needs in retirement depends on a wide range of factors which include the state of their health, the rate of inflation, how long they think they will live, the rate they draw their money down, and the amount they can earn on their portfolio.

Also, as assets diminish, eligibility for the age pension may increase, which can slow down the rate at which assets are being reduced. This is why it is important to form a relationship with a good adviser and assess your portfolio at least once every year.

On my website is a retirement drawdown calculator that enables you to work out how long your money will last based on certain assumptions that you can enter. But it is a rough guide only.

How does Centrelink regard assets like cars, or loan facilities on your bank account?

Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au