The Bank of Canada is keeping interest rates the same for another month.
On March 6, 2019, the Bank of Canada (BOC) announced it would be maintaining the current 1.75% interest rate. This rate has been in place since October of 2018.
Part of the BOC’s reasoning had to do with global trade uncertainty and lower-than-expected Canadian exports and business investments.
But the other part had to do with Canadians themselves – and a decline in consumer spending and the housing market.
According to the BOC, Canadian employment rates and labour income is up, but consumer spending is down. The housing market has also been slow, too, with less people buying homes, or refinancing their current mortgages.
So, why are Canadians making more, but spending less?
The answer is – it’s complicated.
- There have been many reports lately about housing affordability. Particularly in Toronto, the price to rent an apartment keeps going up. With many tenants putting at least 50% of their paycheque (or more!) towards housing, there might not be much left over to spend.
- For those who do own a home, with the housing market softening, property values might be dropping or there is less home equity to access.
- Even as employment rates rise, not all employment is equal. The Huffington Post reported in August that more than 1 in 5 of Canadian professionals are in “precarious employment.” This might mean temporary contract work, jobs with fluctuating hours (like four hours of work one week, 30 the next), or even a lack of job security. So even though more Canadians are employed, it’s not necessarily good employment.
- Canadian household debt reached a new high in 2018 of more than $2.7 Trillion. For those struggling with debt, even more income might not necessarily help depending on the size of the debt. The solution might instead be debt consolidation.
What the BOC Pause Means for You
The lack of an interest rate rise means there is time to get finances under control before interest rates go up again.
- For those with high debt levels or a low credit rating, this is a good time to deal with outstanding debt and work on credit repair.
- It is also a good time to look at accessing home equity funding — if property values are dropping, you might be able to access more now rather than later.
- If you are looking for personal financing, start looking now. You might be able to secure a lower interest rate now than if the BOC rate increases in the future.
At Prudent Financial, we offer bad credit car, personal, and home loans in Toronto and the GTA.
See if you qualify before the next BOC announcement on April 24, 2019.
Contact us today for a free consultation. Call 1-888-852-7647 or visit www.prudentfinancial.net.