Super-sized rate hike
The Bank of Canada surprised markets and raised interest rates by 1% earlier this month. This is the single biggest interest rate increase in almost 25 years. You’d have to go all the way back to 1998 to see a similar interest rate hike.
Why did our central bank raise interest rates so much? It did it to help fight inflation. It doesn’t want the current high inflation rate to be baked into the Canadian economy. It wants to bring it back down to its acceptable band, between 1 and 3 percent. This may take some time, but higher interest rates should help.
Our central bank has said that it plans to front load interest rate increases. It looks like this won’t be the last larger-than-normal interest rate hike. With more interest rate hikes on the horizon and a full-blown recession possible, you’ll want to get your finances ready now.
Accessing the equity in your home
Are you finding it tough to keep up with monthly debt payments? You’re not alone. Anyone with debt tied to prime rate is feeling the pinch with the latest interest rate hikes.
Sure, you could lock into a fixed mortgage rate, but if we get a recession like many economists are predicting later this year or in 2023, you will be locking in when mortgage rates are at their peak. That begs the question, what’s a homeowner to do?
A smart move can be to refinance your property. With home prices up substantially over the last couple of years, why not access some of that equity and put it to good use? Your home equity can act as a safety net for you and your family. It can be there for you as emergency savings in case you were to lose your job during a recession, or you found it tough to keep up with your household bills.
Likewise, you could refinance your mortgage and make your payment more affordable. By stretching out your amortization period, you could keep your mortgage payments the same through prepayments, but with the option of scaling them back if needed if tougher financial times do indeed happen.
Looking to access your equity? We can help. Contact us today.