Threat Of Rising Interest Rates

Threat Of Rising Interest Rates

For a number of months the media has been speculating that the Bank of Canada will rise the interest rate in 2015.  The increase is likely to occur in the later part of the year.  The increase will not be significant but will impact you on your borrowing.

Since the housing crisis of 2008 in the US, I have been telling my clients to payoff their debts.  Not pay down but pay off as much as they can.  Simple math, lower your debt load, when there is an  increase in rates = less impact on you financially, by a smaller increase in your interest payment.

What you can do now:

  1. Start by paying off that credit card debt.  We all know credit cards have the highest interest rate, so when you just pay the minimum payment, you are paying mainly interest.  The principal will not be paid off for a long time.  Use your line of credit and pay off the full amount as soon as you can.
  2. If you have a variable rate mortgage, lock it in now.  Also consider bi-weekly or weekly payments, as you are paying off the principal much faster.
  3. Lock in any other loans you may have.

On the bright side of a higher interest rates is that your savings will generate more income and if you deduct interest on your income taxes then you will have a higher write off.

Please call or email if you have any questions.

 


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