We’ve heard the warning for several months now: the economy is stabilizing, and Canadians have enjoyed an historically low interest rate for years, but a rate hike in inevitable. And, back in July, after months of speculation, the Bank of Canada finally raised the interest rate from 0.5% to 0.75%. This means that payments for most credit products you have – lines of credit, mortgages, loans – may just go up (or have gone up already) to correspond with the new rate.
Those with variable-rate mortgages are likely going to be the hardest hit, as their rates are directly linked to current interest rates. If you have a fixed-rate mortgage, you probably won’t notice much change. The interest rate hike will also significantly impact those with lines of credit because those are linked to the prime rate. Student loan payments are also likely to increase.
With credit cards specifically, the interest rate hike may not initially have an impact since most credit card companies generally charge interest at a fixed rate. Although that fixed rate can be quite high, it won’t increase with the Bank of Canada’s rate. However, if other credit products are impacted and you find yourself missing credit card payments to make other payments, your regular interest rate on those cards may go up.
Whether the most recent rate hike impacts your payments or not, that isn’t the only issue. While the Bank of Canada has not directly stated that rates are likely to increase again, economists have already predicted a further increase in the coming months. That means, if you’re in significant debt, it is time to get a handle on things before the interest rate jumps again and things get progressively worse.
If you have significant debt, especially with regard to lines of credit or credit cards, you may want to consider the ways in which you can pay down those debts before things become troublesome. A personal loan using a car or home as equity to consolidate debt may be the answer. This can also help protect your credit score, which, if you’re missing payments, may take a major hit.
At Prudent Financial, we know how difficult it can be when payments increase and you find yourself in financial hot water. Instead of coasting along, picking and choosing between payments, get in touch with us to find out what options you have to consolidate some of that debt.
We’re here to help: 1-888-852-7647.