The Bank of Canada increased its policy interest rate this week by half a percentage point to help cool the effects on inflation.
But what does that mean for the average spender?
“When the market’s like this, it’s always a good time for clients to maybe re-visit their whole financial situation, maybe look at their total debt load,” said financial advisor Kevin Kranzler, adding consolidating is a solid option for many.
“That way you can wrap up all your debt at one interest rate and then you can manage your payments.”
It might also be time to reign in unnecessary spending habits or hold off on buying that new car, Kranzler said.
Benchmark interest rate hike expected to normalize Okanagan’s real estate market
For those with some extra discretionary funds, investing right now is another avenue to consider.
“When the market is down, that’s the time to invest because you’re buying at the lows.”
When it comes to real estate, the higher interest rates likely won’t have an impact right away, according to Lethbridge mortgage broker Vittorio Oliverio.
“When people hear prime going up, they think the fixed interest is going up,” Oliverio said. “And while the fixed interest (rates) have gone up, you have to realize that the last two years it’s been crazy with the interest (rates) being as low as they were.
“One of the reasons why people are buying houses like crazy right now is because they have pre-approval with the interest rate of 2.2 or 2.4, that kind of thing. Those pre-approvals will end at the end of July (or August).”
After that, Oliverio expects the local market to slow down as buyers have no other option than to use the higher interest rates.
That will be hard on home buyers, especially those looking to own their first property.
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“Even though they have very good jobs, and they live in Calgary,” he said of family members, “they cannot qualify for a mortgage because the payments are a little bit too much, and now with the new increases? They will not qualify.”
According to REMAX, the average asking price for all Lethbridge properties currently for sale was just over $370,000 as of Thursday.
“My advice is simple: if you have the means to buy a house now, yes. Go ahead. Don’t sit on the fence,” Oliverio said.
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