Corpcentre's Blog

January 14, 2010

The End of Low Interest Rates

The period of low interest rates is coming to an end. According to current forecasts, the rates will start rising midway through 2010. For many Canadians who went on holiday shopping sprees, stretching their credit limits to the max, the rise could spell sudden difficulty or disaster.

The Bank of Canada has warned that the biggest risk to the country’s financial system is record household debt. Canadian households spent an average $71,360 last year, two per cent more than 2007. Approximately 20 per cent represented housing expenses.

As many Canadians wish to unload their mortgages as soon as possible, they are struggling to meet payments due to accelerated pay-downs on principal. Combining these high payments with other debts has put a stranglehold on many consumers.

It is crucial to take control of your debts before they control you. Experts suggest developing a plan of action to tackle your debts before problems arise.

It may be wise to suspend accelerated pay-downs on your mortgage. Use the extra cash from the lower mortgage payments to tackle the credit cards and other debts. Refrain from adding debts to your cards while you reduce the balances. Remember that higher unpaid balances carry higher rates of interest. It may also be advisable to take a consolidation loan at a lower rate of interest and pay off the cards. Also, try not to use more than one or two credit cards.

Sometimes, debts can get the best of us. Don’t be afraid to seek help from credit counselors, if you feel that you are beginning to drown in debt. These professionals can help you before you panic and assist you in gaining control of your financial situation.
 
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December 29, 2009

Canadian Consumers May Rock Economic Recovery

Filed under: Bank of Canada,bankruptcy,economic recovery,mortgage — corpcentre @ 6:15 pm

Recent statements by Bank of Canada governor, Mark Carney, reflect a spirit of optimism but also carry an undertone of warning.

Despite the recession, Canadians have amassed greater debt, due, in part, to the low interest rates currently dominating the market. These rates, currently at an historic low of 0.25%, were set by the Bank of Canada as emergency interest rates in order to resuscitate an ailing economy. The rates will rise eventually and Mr. Carney, as well as other leading economists, fear that many Canadians may be caught short. Mortgage rates have been extremely low for months while housing prices have rebounded. This has created a perfect setting for many Canadians to take on large debts. However, as the economy improves, interest rates may rise, at a quicker rate than they dropped. Mr. Carney is cautioning Canadians that purchasing a more affordable home today may be a wise choice.

One of the early warning signs of Canadians over-extending is the rise in personal bankruptcies. The third quarter of this year showed a 41 per cent jump compared to the same period in 2008. Similarly, the delinquency rate of mortgage payments has risen by 50 per cent in the last year.

The governor emphasized the vulnerability of the country’s economy due to household defaults. As consumers are the key drivers to the nation’s economic recovery, Mr. Carney, therefore, hazards Canadians about avoiding credit risks. Of course, a similar warning has been issued to lending institutions to properly monitor household credit.

Mr. Carney strongly believes the Canadian economy is definitely on the rebound and he expects Canada to outperform the other G7 countries. However, Canadian households will play a vital role in that economic recovery and the governor hopes that Canadians will act with economic responsibility for the collective good of the nation.
 
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