How To Protect Yourself From Rising Interest Rates
The Reality of Higher Interest Rates
The last 6 months have seen many changes to the mortgage landscape, with the onset of the new mortgage stress test for uninsured mortgages, the increase in the stress test rate for insured mortgages, increases in the Bank of Canada overnight rate, a steady rise in fixed mortgage interest rates all combine to make buying and maintaining a home that much more expensive. Add to that the general increase in the cost of living.
The increase in Prime rate will also affect unsecured credit such as lines of credit and credit cards. And the Bank of Canada is certainly in an upward trend with the Prime. Given the indebtedness of Canadians, stormy seas are certainly ahead for the unprepared.
What will these interest rate increases mean for you?
In 2019, however, it is very likely interest rates will be significantly higher than the interest rates secured by consumers in 2014. This cohort could see significant payment shock.
What this all means is this. As interest rates go up for mortgages and unsecured debt such as credit cards and lines of credit, payments will also increase, eating into what little disposable income Canadians have left.
What can you do?
- Consider consolidating your unsecured credit with your mortgage and lock in at today’s still low rates before you start to feel the pinch.
- If you are in your retirement years, consider the benefits a reverse mortgage can provide.
If your mortgage is maturing in 2019, consider breaking the mortgage early and locking into a new mortgage term and today’s lower interest rates.
The Bottom Line
The new mortgage rules that came into effect January 1, 2018 could also have an impact on your ability to qualify for what you need.
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