The Bank of Canada mortgage rate is remaining at 1.25% for now.

In an announcement on May 30, 2018 the Bank of Canada (BOC) said that the overnight interest will stay at 1.25%, at least until the next statement scheduled for July 11, 2018.

The BOC said it is proceeding with caution, but that it still believes higher interest rates will be needed for the future.

Since July of 2017, the BOC has raised Canadian interest rates (and correspondingly Canadian mortgage rates) from a record low of 0.5% to the current 1.25%. There have been three increases during that time, with the most recent hike happening in January of 2018.

Despite the May 2018 hold, economists are predicting that the BOC will raise interest rates at least once more in 2018 — and it could be during the July 11 announcement. Currently, the predicted chances of a July interest rate increase are sitting at about 55%.

What does this mean for your mortgage, or other debts?

As you’re likely aware, the BOC interest rate affects all forms of unsecured debt. This can include the amount you owe on your credit cards, unsecured lines of credit, variable-rate mortgages, or any other forms of debt with a changing interest rate.

Even if you have a debt with a fixed rate, such as fixed-rate mortgage or a fixed-rate loan, if you have a renewal coming up, the increasing interest rates might mean that your lender will renew your debt at a higher rate.

Although Canadian interest rates are staying steady for now, it’s still important that you look at the overall picture. Consider the following:

1. Don’t Rush into Too-Good-To-Be-True Deals

Recently, some Big 6 banks have been offering heavy discounts on variable-rate mortgages. To recap, a variable-rate mortgage is one that changes with interest rates. If interest rates go down, your mortgage goes down. But if interest rates go up, your mortgage goes up.

If you’re shopping for a mortgage, you’re up for a mortgage renewal, or you’re considering mortgage refinancing, these deals can look very tempting. But you need to consider the rest of the implications. If interest rates increase, as they are predicted to do, could you afford the hike? How much other debt do you carry and how would that be affected by an increase? You need to assess all the variables.

A variable-rate mortgage could still be the best choice for you, but make sure you are comparing it to a fixed-rate mortgage and understanding that there is a greater chance of a variable-rate mortgage becoming unaffordable.

2. Make a Plan for Your Debt

The good news about the BOC keeping interest rates at 1.25% is that you have more time to pay down existing unsecured debt before rates increase again. So, if you haven’t yet made a plan to deal with your debt, now is the time to do so.

Look into your debt consolidation options. It might be in your best interest to consolidate your debts into one fixed, monthly payment. This way your payment rates will remain the same no matter what happens with the interest rates, and your debt won’t rise any higher.

3. Be Extremely Cautious About Taking on New Debt

These interest rate increases aren’t going anywhere. In fact, this is just the beginning. The BOC has stated they still feel interest rates need to be higher. One of the reasons they kept interest rates low for so long was because Canadians needed to spend money to fuel the economy. Lower interest rates encouraged more Canadians to take out more loans, put more on credit cards, etc. But now the economy is relying less on consumer spending, which means that it will get more expensive to take out new debt and more expensive to pay back existing debt.

If there’s a debt you’ve been considering taking out, really ask yourself if you can afford it. Take a look at your whole financial picture. Now might not be the right time to look into a new line of credit or to open up a new credit card. If you are already living paycheque to paycheque and making ends meet through loans, adding more debt is likely to only make the situation worse, especially as interest rates rise.

Don’t wait until the next BOC interest rate increase to get your debt under control. Whether you’re affected by Canadian mortgage rates, interest rates, or just want to understand your financial picture, DebtCare Canada can help.

We offer debt relief solutions, financing programs for loans and mortgages, and much more.

Contact us today for a free consultation: www.debtcare.ca or 1-888-890-0888.