Debt Recycling – A Strategy for Every Market

Navigating Financial Success in a Higher Interest Rate Environment

In this article we’re going to explore a financial strategy that remains powerful even in the face of rising interest rates: Debt Recycling. With interest rates at elevated levels, understanding how to make the most of this strategy becomes essential for optimising your financial well-being.

Debt Recycling: A Quick Overview

Debt recycling is a financial strategy that involves leveraging your home equity to invest in income-producing assets, such as shares or managed funds. The idea behind this strategy is to use the income generated from your investments to accelerate the repayment of non-deductible debt, like your mortgage, while simultaneously building a portfolio of assets that may provide you with future financial security. Over time, you fully “recycle” your non-deductible home loan into tax effective investment debt, knocking years off your loan and building a valuable portfolio on the side. See it in action here.

Why Debt Recycling Remains Powerful

  1. Interest Deductibility: Even in a higher interest rate environment, the interest on your investment loan remains tax-deductible if you’re using it for income-producing purposes. This tax advantage can offset some of the impacts of rising rates.
  2. Long-Term Perspective: Debt recycling is a long-term strategy. While short-term fluctuations in interest rates may cause concern, it’s crucial to focus on the bigger picture. Historically, markets have shown resilience over time, and typically outperform mortgage rates.
  3. Compound Growth: The power of compound interest is a key driver behind debt recycling’s effectiveness. As your investments grow, they can contribute to reducing your non-deductible debt faster than simply making extra repayments.
  4. Risk Management: Diversifying your investments can help spread risk. Diversification is a fundamental principle of investment, and it remains relevant even in uncertain interest rate environments.

Tips for Effective Debt Recycling in a Higher Interest Rate Environment

Regular Reviews: Regularly review your financial plan to ensure it remains aligned with your goals, risk tolerance, and current market conditions. Adjust your investment strategy as needed.

Professional Guidance: Consult with a financial planner who specialises in debt recycling to ensure you are making informed decisions based on your unique financial situation.

Emergency Fund: Maintain an emergency fund to cover unexpected expenses and ensure that you have a buffer in case interest rates rise further.

Volatility is your friend: While it’s natural to fear a decline in investment values, debt recycling is a strategy for wealth accumulators – and market falls represent a great buying opportunity, for either a larger ad-hoc investment, or else regular monthly investments.

Patience and Discipline: Remember that debt recycling is a long-term strategy. Stick to your plan and avoid making impulsive fear-based decisions regarding short-term fluctuations.


Even in a higher interest rate environment, debt recycling remains a powerful wealth-building strategy. By harnessing the benefits of interest deductibility, compound growth, and a long-term perspective, you can navigate the changing financial landscape with confidence. Remember to seek professional guidance, and maintain a disciplined approach to achieve your financial goals.

At AGS Financial Group, we are committed to helping you make informed financial decisions and achieve your financial objectives. If you have any questions about debt recycling or would like to discuss how it fits into your financial plan, please don’t hesitate to contact our team of experts.

Published : 11 Oct 2023