The Bank of Canada hit us with another rate increase today.* This was not a surprise to anybody, anywhere.
But, expecting something unpleasant to happen doesn’t make it hurt any less. From coast to coast, Canadians will buckle a little more under the burden of lines of credit, HELOCS, variable rate mortgages, etc.
Fact is, as rates rise, interest-only payments go up. Likewise, combined interest plus principle payments suffer from the dreaded “Less for Me, More for Them” syndrome.**
The party won’t end here.
The Bank of Canada has made it very clear that additional rate increases are in our future. How fast & furious these increases will occur remains to be seen.
An overriding target of 2% inflation is their reason for most of what they do.
Sure, 2% inflation is a challenge if you are the BoC but many competing forces from various global and local economic & political factors are at play. Mathematical calculations on government letterhead apparently make sense to some politicians even when the final numbers deliver a real-life punch in the face for individual Alberta families.
We already have a lot to deal with in this province. Many, many people I work with on a daily basis continue to wrestle with the ugly fallout from the oil crises.
- Young folks, graduating with the latest skills, face a bleak employment landscape.
- Retirees trying to downsize are finding that buyers aren’t showing up.
- Skilled workers with decades of employment history under their belts are signing up for contract and piece work.
Emerging from a period of historically low interest rates hurts. The pain is inevitable. We all expected it but we don’t have to like it.*** Adjustments will be required, personally and professionally.
The wisest course of action is to know your options.
If you are looking to get a handle on changing loan terms, interest rate trends and what it all means for you and yours, call me today.
*Take a gander at the Band of Canada’s take on their latest interest rate play here: https://www.bankofcanada.ca/2018/10/fad-press-release-2018-10-24
**Either at renewal date for fixed rate obligations or right away for variable rate loans of all types. In other words, ouch. And, ouch. *@!%@@!*
***With the possible exception of non-indebted, fixed-income investors. This sector of our population should be basking in rate increases. The benefits, though, have not yet trickled down.
