Interest rates in Canada are on the rise again and, according to a recent survey, many Canadians are already feeling the financial effects. In fact, 1 out of every 3 Canadians reports feeling worried that they won’t be able to handle their monthly bills and expenses if interest rates continue on this upward trend.
If the rising interest rates have you worried, relax, take a deep breath and don’t panic! We’ve been here before, and although it’s not ideal, it’s a part of life to deal with a fluctuating economy. Here are two easy ways that you can proactively deal with the increasing rates:
Here’s the good news
Although you might be feeling the financial squeeze, it’s important to look on the bright side. Firstly, the most recent increase, from 0.5 percent to 0.75 percent, is relatively small and likely won’t have too much of a negative financial impact. Secondly, it’s important to note that rising interest rates are actually a good thing – as they can help to control inflation. The theory is, as interest rates go up, consumers tend to save money and spend less, because the returns from savings are higher. Over time, with more people spending less because of higher interest rates, the economy will slow down, and then so too will the interest rates. It’s a cycle. Interest rates and inflation tend to go in opposite directions.
Focus on your debt
One of the best ways to avoid the negative effects of rising interest rates is to take this opportunity to focus on your debt. Reducing debt is a key component to financial success; you don’t want to have to spend a penny more on interest to a lender than necessary. During times of rising interest rates, it may be a good time to cut back in some areas, in order to put more money towards paying off the consumer debt you owe.
In addition to focusing on debt reduction, rising interest rates also mean that it’s probably an ideal time to consolidate the debts you have. Consolidating your debts means combining multiple debts that you carry into one single debt – with a lower interest rate attached. Not only does this help to simplify your repayment process, it can help to reduce your monthly payments, as well as potentially allow you to pay down your debts more quickly. The added bonus is the boost you will eventually get to your credit rating score if you are paying down, and paying off, your debt.
One opportunity that works well for many people is to consolidate many of the debts you carry into your mortgage. Mortgage rates are typically lower than many credit card and other loan interest rates, so even if you don’t qualify for the very lowest mortgage rate out there, you’ll still be ahead of the game by paying less interest overall. Given the variety of options available, it’s important to do your research to decide whether debt consolidation is right for you, and to always read the fine print on anything to do with your finances.
Review your mortgage
Reviewing your mortgage is another way to proactively deal with interest rates on the rise. If you currently have a variable-rate mortgage for example, you may want to consider switching to a fixed rate. Be aware, however, that switching before the end of your mortgage term will mean that you are not able to negotiate the best rate, and will also be locked in at this rate. Further, if you want to switch lenders, you will have to pay a penalty.
For first-time home buyers, an increase in interest rates makes it even more important to find the best rate possible so you can get into the housing market and stay on top of those payments. As such, working with a mortgage broker is always beneficial, as brokers have access to a variety of different lenders and can negotiate with them to help secure the best rate possible.
Have questions about how to proactively tackle increasing interest rates? As a professional mortgage broker in Barrie, I can work with you to find the best mortgage rate available, and can work with you to determine whether debt consolidation is the right step for you to take. Connect with me today by calling 705-315-0516 and we’ll set up an opportunity to chat and explore your options.