It was bound to happen one day. The Bank of Canada decided to raise its interest rates on July 12th for the first time in years. Every large bank followed suit the next day. It is now time to revise your budget accordingly.
This first hike does not mean there will be a second one on September 6th of this year, and that the interest rates will keep rising afterward. But, better be safe than sorry, especially given the fact that the total Canadian household debt has reached a record high.
The Bank of Canada is anticipating an increase in the inflation rate. CIBC Bank economists, who issued the “Canadian Inflation: What’s Gone Wrong?” report, also believe the inflation rate will hike soon. Mortgage holders living on a tight budget should prepare accordingly.
What should we do in the meantime? We ought to protect ourselves the best we can. Via Capitale provides possible solutions.
- Start planning your budget now for the next interest rate hike. This will ensure your financial flexibility and get rid of the element of surprise. In other words, be proactive instead of reactive. Anticipate what’s coming.
- Examine your large expenses and do not hesitate to shop around for deals. For example, Quebecers are among the most insured in the world. The Insurance Bureau of Canada (IBC) will guide you on how to reduce your home insurance costs.
- Consider making compromises regarding everything that is of secondary importance. Furniture, building materials, renovations are all necessary. Remember that the market abounds with high-quality recycled products. Get informed.
- Calculate your budget once again. If needed, use the calculator provided by the Financial Consumer Agency of Canada (FCAC), an independent organization.
Actually, here is more advice given by the FCAC.
- Pay off the most substantial debts, especially those with the highest interest rates;
- Make advanced mortgage payments or choose an accelerated payment option;
- Reduce your expenses and spend more money reimbursing debts;
- Avoid accumulating more debts;
- Put money aside to face unforeseen circumstances.