Do you ever wonder what those Bank of Canada announcements that come out almost every month have to do with you? The last one came out yesterday and said that the rate won’t change and that Canada’s economic recovery will take longer than they first thought. Is that good news or bad news, or should it even matter to you?
They can impact your job
Well, it depends, actually. If you’re looking for work in an industry that’s been hit hard these last few years, it might mean that it’ll still take several more months, or even a year, before the job market looks a little better again.
They can affect your home or your retirement
If you’re trying to sell your home, again, with people not as certain about their jobs and income situations, it may take a little longer to find a buyer, or you may need to drop the price. If you’re looking at your retirement portfolio, the low interest rates are making it hard to recover your losses. That may mean that you need to save more or prolong your retirement date. That’s the dark cloud, but there is a silver lining.
They can help you save money and get ahead
If you’re carrying debt on a variable rate line of credit, mortgage or loan, you have just been given the gift of time by Mr. Carney. Because he didn’t raise the rate, most lenders won’t either for their variable rate products. With rates still near historic lows, you can use this opportunity to pay off your debt much faster. So many people have become used to using credit to make ends meet, prolonging the inevitable is just that. And when rates go up, it will be that much harder to get out of the hole.
Low interest rates make it easier to get the most out of any payments you are able to make. And if you can top up your variable rate mortgage payment by even $100 a month, you’re shaving years off your mortgage and saving thousands of dollars in interest. If you’ve used your home as an ATM and have refinanced your mortgage to pay off higher interest loans and credit cards, it’s time to make your house your own again.
To accelerate your payments and get the biggest bang for your buck, make sure that you establish a realistic household budget; one that allows for debt payments, weekly and monthly expenses, but also saves for the expenses that typically cause you to turn back to your credit cards. And if you don’t know how to create a budget, we’re just a phone call away.
The bottom line
So do these announcements matter? While they shouldn’t make or break your day, they're as close as you'll come, financial speaking, to that proverbial crystal ball. If you don't do something about your situation now, don't complain that no one told you that rates would go up again.