Canadians will soon no longer be able to enjoy low interest mortgage rates. A recent key rate increase by the Bank of Canada means that after nearly a decade, borrowing costs are on the rise for Canadian consumers.
Household debt in Canada is at a near all-time high — and this debt is only expected to rise. What does this mean for Canadian homeowners with mortgages?
A large a mortgage-rate comparison website recently, did the math. The recent increase has placed the lowest available variable mortgage rates at 3.22 percent, up from 1.75 percent in July 2017. This comes to over $200 more in monthly payments for a mortgage that is $400,000.
And as interest rates rise, so will the debt that Canadians have accumulated — but there are ways homeowners can take control of their debt even amidst rate increases.
Homeowners who are struggling to pay off debts have different options they can choose from if they want to get their finances in order. One way to do this is through debt consolidation, which consolidates debt into one single loan with a lower interest rate.
One way a homeowner can do this is by borrowing money against their home’s equity. This can be done in two different ways: mortgage refinancing or a home equity line of credit.
Non-homeowners who require smaller loans can consider an unsecured line of credit.
Paying off Debt as Interest Rates Go Up
Homeowners who are in debt should always prioritize loans that have the highest interest rates. They should also:
- Crunch their numbers
- Identify where their money is going
- Consider other forms of income like Airbnb, renting out a part of their home, a second job, etc.
Homeowners who have extra cash can consider putting some of the money towards their mortgage, which could potentially result in thousands of dollars of savings over the term of the entire mortgage.
Consolidate Your Debt Today
Most Canadians will not feel the effects of the rate increase immediately as many of them are on fixed-rate mortgages. If you need help consolidating your debt and are looking for a solution with low interest rates, we can help. To find out how much you qualify for and to find out how you can manage your debts, call us today for a consultation.