Your Path to Debt Freedom
Another Bank of Canada rate announcement is coming next week on January 17, 2018. It could mean another interest rate increase for Canadians — which would mean another mortgage rate increase for homeowners.
In 2017 there were four Bank of Canada rate announcements. The first came in July 2017, when the interest rate increased from 0.5% to 0.75%. In September 2017, interest rates increased again to 1%. In October 2017, the Bank of Canada announced interest rates would be staying at 1% — for now. They held the interest rate again in December 2017, but indicated more increases would be coming.
Experts are predicting the January 17 Bank of Canada rate announcement will be another pause, but that further interest rate increases will be coming later in 2018. The question to consider if you’re a homeowner, or a potential homeowner, is whether it is riskier to act now, or wait and see.
The first consideration to make is what type of mortgage you have — are you on a fixed-rate mortgage, or a variable-rate mortgage? If you have a fixed rate that is relatively low, the safest option may be to stay where you are. But if you have a variable-rate mortgage, now is the time to ask the tough questions.
You might be getting a good deal on your variable-rate mortgage now. However, if interest rates increase again (and possibly again in the future) that variable rate isn’t going to be looking so good. Can you afford your mortgage if interest rates increase more in the future? Don’t forget that interest rate increases don’t only affect your mortgage — they’ll impact all forms of debt. So, if you’re carrying large student loans or credit card bills that don’t have a fixed-rate repayment schedule, you could be in trouble.
Even if you think you can handle an interest rate increase now, have you thought about your future plans? Rising interest rates could result in you seeing a dip in the value of your property and will reduce the options you have regarding selling or refinancing. If you are thinking of moving or your mortgage is coming up for renewal, it would be a good idea to take that into consideration when you look at your financial situation.
The time is right to take good hard look at your finances to prepare for a shift in the housing market — unless you prefer to take the route of the gambler, waiting until the last second to see if he or she has a winning hand. When it comes to interest rates and mortgages, though, you don’t want to make a bet you can’t afford to lose.
At Spergel, we can help you best understand and explore the options that meet your current needs. We have the experience that translates to real results, no matter the current housing market. Want to talk to someone about dealing with debt that has become overwhelming?
We’re here to help: toll-free at 310-4321.