Interest Rates to Climb?
Prince George, B.C. – There is growing speculation the Bank of Canada will increase its key interest rate before the year end, and possibly as early as this month.
The Canadian dollar has been moving up against the American dollar, and the price of oil has slipped a little. Bank of Canada Governor Stephen Poloz recently told media in Germany that while the current economy looks good, the Bank of Canada has to plan for a year or two down the road.
The current key interest rate of the Bank of Canada is 0.50%, it has been that way since 2015 when the rate was reduced in the wake of the Ft. McMurray fires and the resulting drop in oil production. Boosting the key interest rate by 0.25 basis points, would simply restore the rate to what it was before that 2015 reduction.
But oil prices are in the healthy range once again and the latest report from the B of C indicates confidence from business and consumers for the balance of 2017.
The BC Real Estate Association says with oil prices relatively stable, “there is no longer a need to keep interest rates at their current level. Secondly, rapid growth in the Canadian economy means that slack in labour and products markets is being eliminated faster than expected, which should begin to put upward pressure on inflation, with a return to the Bank’s 2 per cent inflation target sooner than currently projected.”
Some are predicting an increase could come as early as July 12th, with a second boost possible before the end of the year. The BCREA is a little more cautious, suggesting the Bank of Canada will hold off on any increase until early 2018.
If the B of C increases its key interest rate, it will be the first time it has been increased since 2010.
This will be a reality check for all those with large loans or mortgages. When I had a mortgage, I put every dollar into paying down the mortgage. The banks make too much profit as it is, why give them more of your hard earned dollars.
Why should there ever even be a “targeted inflation rate”? At 2% a year our money is losing 20% of its purchasing power every 10 years. Or, put another way, prices on average are increasing by that amount relative to incomes over that period. The money we earn to have to try to pay them.
Yet over every decade production efficiencies increase. And a ‘production efficiency’ is “more product output, with less labor input”, is it not? And if not, then just WHAT is it? If it is, shouldn’t costs, and prices, be coming DOWN relative to those same incomes? For if we are producing ‘more’ year by year, and for ‘less’ REAL cost, what good does that really do us if we can’t afford to BUY that ‘more’ at its FINANCIAL cost, the way it’s currently accounted?
If the Chinese economy collapses there will be a lot more to worry about than a tiny rate increase. Some believe that could result in a world wide depression lasting years.
Re: “jack son’s” comment on paying off mortgage. The best financial advice I was ever given, was to pay up to 10% of the mortgage on the anniversary date, and this came off the principal with no penalty. While I could not afford the full 10% the first few years, it wasn’t long when I could. I assume that this is still true of present day mortgages?
My mortgage allows 15%.
Our mortgage allows 20%
Actually, the best plan is not to pay off your mortgage faster – it’s to pay off your highest interest rate debt faster. Example, if you’ve got a credit card with a 22% interest rate, and you’re paying an extra $10,000 on your mortgage with a 3% interest rate, the bank thanks you, for paying them $1,900.00 more in interest than you had to.
Order your debt by interest rate, pay it off by highest rate first, and once a credit card is paid off, cancel it. And what they don’t tell you, is you can reduce your credit limit. So say you’ve got $20,000 owing on a card, you get it down to $15,000 – call them and reduce the limit to $15,000 so that you can’t just re borrow the money and go back in the same hole.
Once the high rate debt is gone, then look at the mortgage.
This guy gets it…
Or if your mortgage is low enough, remortgage to pay off your lines of credit and high interest credit cards, then drop a card or two. You have just changed your interest from say anywhere from 22 to 29 percent down to whatever your mortgage may be, possibly at low as 2 or 3 percent.
Also true …
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