Interest Rates are Rising – Here’s What it Means for You
We’ve enjoyed historically low interest rates over the last couple of years, but now that the Bank of Canada is hiking its benchmark interest rate, you may be thinking, “What does this mean for me?”
Here in Canada, our inflation rate has been on the rise, up to nearly 7% it’s the highest it’s been since the early 1980’s. The Bank of Canada has been increasing interest rates to help manage this inflation, with still more rate increases expected in coming months. These higher interest rates lead to less borrowing power, with some individuals beginning to feel financially strained.
What should you expect?
If you have a variable mortgage rate or a mortgage that is coming up for renewal, you’ll likely see an increase on your monthly loan costs. Your lines of credit will also see an increase in the interest you are required to pay back.
The housing market may slow as rates increase and affordability decreases. If you’re considering buying a new home, you may encounter new difficulties in qualifying for the house of your dreams. With interest rates and inflation climbing, that means less money in your pocket and higher monthly costs, resulting in a reduced mortgage approval amount.
What can you do?
It’s time to create or update your budget! Taking a look at your income and expenses on the regular is a great tool to ensure you’re enjoying life while balancing a savings and investment plan. A little planning now can go a long way for your financial future.
If you are in a variable interest rate, you may receive an increase in calls from your financial institution as your rate increases to make you aware of your new payment amount. If you’re able to, increase your payments by a small amount, this can help to pay off you your debt faster as more of your money is going towards the principal of your loan.
Consider if a fixed rate product is right for your loans at renewal or where available. This can give you a more budget-friendly option and creates stability in your monthly payments for years to come.
Meet with your mortgage broker to discuss your current situation and options. Just like the market, your life is always changing. Completing a mortgage review with your broker is a great way to ensure you’ve got the loan product that’s best serving you.
If you’d like a complimentary review of your mortgage, I would love to help find you the best rate and terms for your unique situation. Connect with me at firstname.lastname@example.org