The Canadian economy is booming, or so they say, and this means interest rates have increased twice in less than two months. There are a lot of question marks as to what this means to people on already tight budgets. While there’s nothing we can do to change the Bank of Canada’s mind about their decision, there are a number of ways to protect ourselves from increasing rates, and here’s what you need to know!
Get A Fixed Rate Mortgage
People who want a set number to plug into their budget are best served by securing a fixed mortgage rate, which won’t budge until it’s time to renew. Those who are close to renegotiating with budgetary concerns may want to connect with a mortgage broker ahead of time to explore the options of securing a blended rate. If you have a variable rate mortgage and want to know what this increase is going to mean for your budget you can visit this mortgage rate increase calculator here.
Connect With Your Home Equity Line Of Credit Provider
If you have a variable loan and are feeling the pinch already, consider renegotiating a fixed loan, particularly if you are coming to the end of your term.
Car Loans & Credit Cards
Look at your billing statement or connect with your provider to see if you are on a fixed term loan (as is the case for most credit card and car loan agreements). This information can help you adjust your budget accordingly.
Participate in Mortgage Pre-payments
People who make balloon payments, round up to the nearest $50 or $100 on their regular payments, particularly during the first few years of the loan, will pay less interest overall, and will be rid of their mortgage earlier. Warning: just be sure to know the amount allowed for prepayments so you don’t end up paying a penalty!
Keep Networking With Your Mortgage Broker
Don’t be afraid to check in with your mortgage broker annually to prepare you for any coming changes in interest rates or for some advice surrounding your budgetary concerns and questions.
Work That Emergency Fund
A sudden increase in mortgage rates might be an ’emergency’ to your current budget. Save this money, and use it when you need it to keep on track, cause that’s what it’s there for!
Boost Your Savings
There’s no guarantee here, however historical data generally trends towards an increase in interest earned on savings accounts, so there may be a little more money in your savings account for things like balloon payments, bucket list items, and retirement savings.