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5 Ways to Save Money Before the Bank of Canada Raises Interest Rates

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5 Ways to Save Money Before the Bank of Canada Raises Interest Rates

Borrowers can still get a bargain as long as they don’t miss out on this opportunity

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This article was created by MoneyWise. Postmedia and MoneyWise can earn an affiliate commission through the links on this page.

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The Bank of Canada continues to keep the country’s key interest rate at a low of 0.25 percent, but the good times for borrowers won’t last forever.

As the economy recovers from the worst of the COVID-19 pandemic, inflation is rising and more people are returning to work. The central bank now says that a rate hike could come as early as the end of 2022, much earlier than expected, even a few months ago.

That means time is running out for a cheap loan for a fun shopping, renovation project, or money-saving refinance. Here are five moves to consider before interest rates go up.

Refinance your home loan

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Over the past year, as millions of Canadians played with their thumbs at home, many took advantage of remarkably low mortgage rates to upgrade to a larger home. That added to the pressure in an already scorching housing market.

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While higher prices mean first-time home buyers will still have a hard time getting a foot in the door, today’s ultra-low rates mean Canadians who already own a home can potentially save thousands by refinancing.

As a general rule of thumb, if your credit score is in good shape, you have at least 20 percent equity in your home, and your current mortgage rate is 0.75 percent higher than currently published rates, it’s time to look for a new deal.

Keep in mind that the rising value of your home also offers the opportunity to leverage your equity for all kinds of needs, such as financing home improvement projects or paying off high-interest debt. (If you live in the greater Toronto area, you can Find out how much your home is worth in about two minutes.)

Consolidate your debt

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The pandemic made it difficult for anyone to travel, eat at restaurants or spend on retail purchases, and many used the money they did not spend on those activities to increase their savings and pay off debt.

With little to do, many Canadians saved more than they had done before, and the savings rate increased from 1.4% to an incredible 14.8 percent in 2020, according to the Conference Board of Canada.

At the same time, families who lost their jobs during the recession have been struggling to make ends meet. A quarter of Canadians had to borrow more, one in five had to do an emergency savings raid, and 14 percent used credit cards to cover monthly expenses, according to a survey by the consumer insolvency company MNP Ltd.

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If you’ve been relying on credit cards or other forms of high-interest debt to get you going, the monthly loss of your bank balance will add up quickly.

For those who cannot borrow from their home equity to pay off their card balances, debt consolidation loan It could help you get out of debt sooner and save a ton in expensive interest.

Work on your credit score

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While today’s low rates allow people with average credit to find an affordable loan, that will change when rates go up.

Take a take a free look at your credit score, because now is the time to work to improve it. When loan costs are higher overall, it’s even more important to unlock the lowest rate possible.

Increase in your credit score It will make you more attractive to all types of lenders, from credit card issuers to those that offer mortgages.

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Refinance your private student loans

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As with other forms of debt, late payments on your student loans can affect your credit score and make it difficult for you to rent an apartment, buy a house, or even get certain jobs.

But if you’ve had a hard time making your payments, your first step shouldn’t be a refinance. Instead, check to see if you qualify for a government payment assistance plan.

Why? Although it’s easy to get a good rate on a private loan right now, refinancing a government loan through a private lender will disqualify you from student tax credits and other support.

However, if you’ve already taken out a private loan or line of credit to cover your excess education costs, refinancing today could offer a lot of relief. Be sure to compare loan offers from various lenders to ensure the lowest possible rate.

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Find better returns on the stock market

Close up of man casually looking at stock market charts on a tablet.

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While the low interest rate environment is great for borrowers, it also means that you will earn next to nothing if you put your cash into a savings account.

If you feel like taking a little more risk, consider investing your extra money for a much higher return. Please note that some popular platforms allow you to invest your money for free.

And even if you only have a few crazies to spare, you can sign up for an account that invests for you using your “spare change”.

This article was created by Wise Publishing, Inc., which provides clear and trustworthy information that people can use to take control of their finances. Millions of readers across North America have come to rely on the Toronto-based company to help them save money, find the best bank accounts, get the best mortgage rates, and navigate many other financial matters.

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