Rising Interest Rates Could Become a Problem for Your Family

On July 12th, for the first time in nearly seven years, the Bank of Canada (BOC) decided to increase their benchmark interest rate by 0.25%.  Major Canadian banks followed suit the same day and increased their consumer-facing rates accordingly.

The implications of this adjustment are broad and significant.

But, in the short-term, an increase of 0.25% to 0.75% is unlikely to cause problems for the average family.  There are still a few reasons we need to pay attention…

  • The Bank of Canada is telling us that they believe the Canadian economy is in a very strong growth position.
  • We’ve been led to expect additional increases to the benchmark rate. Most likely we will see another +0.25% in the Fall 2017, and +0.25% again in early 2018.
  • People with Variable Rate loans will be paying more interest. For many, this will mean higher monthly payments on their Mortgages or Lines of Credit with each increase to the BOC rate.
  • Fixed Rate loans will also become more expensive as we move forward.

The take-home lesson for the average family is:

Review your Debt Management strategy with a professional, as soon as possible.
Conditions are changing, and doing nothing could be very expensive!

BOC key interest rate history

Image source: global-rates.com