Arguably, some have reported that the economy is improving. Some Canadian families have even started to use credit with confidence again. To all of you who are dipping back into your credit, you should heed the Bank of Canada Governor warning.
Recently several news agencies reported on statements made by Mark Carney (Bank of Canada Governor) where he warned Canadians that the Canadian economy may be growing again but Canadians will be feeling the negative economic impact of the global recession well into the future.
He also advised, in response to the recent report with respect to Canadians high utilization of consumer credit that “Without a significant change in behaviour, the proportion of households that would be susceptible to serious financial stress from an adverse shock will continue to grow.”
You see interest rates are only low because of the recent recession and record unemployment rates. Interest rates have nowhere else to go but up, they can’t stay at 0% or 1% forever. As the economy continues to improve rates will continue to rise, until they reach a point where economic stability is threatened.
The challenge is that those who are taking advantage of low interest rates now and utilizing credit may face a rude awakening when rates continue to rise. Especially those who own their homes because when their mortgages come due they could face higher interest rates and higher mortgage payments, this will make all of that new credit difficult to pay back, should rates go up.
The best plan, if you have credit card debt, is to stop using the cards and devise a plan to pay them down. Consider refinancing your home and consolidate your debt down to one low payment. If you are nervous about what’s been happening in the economy and with interest rates – consider locking in your new mortgage. For more information about mortgage interest rates visit www.gtamortgagematters.com.