The impending doom of higher interest rates (maybe)

In today’s Record there’s a story about interest rates, again and that they would go up soon. April? June? July? It supposes one of those months. This (so called) story isn’t new. If you’ve been following this story, there is nothing new here, in fact for the past 12 to 18 months there’s been a story at least every month that has predicted the future doom of interest rates.

It will increase your mortgage payments, eventually. Lock in now if you’re scared, just like those who locked in 1, 2, 3 years ago. That’s the underlying advice. The banks love security.

Where’s the science you ask? That’s a good one. Here’s how I understand it. The interest rate helps control inflation. If the supply of money is (near) freely available from lenders, consumers will borrow more and thus spend more therefore driving the prices of (certain things like houses but maybe not cars) up. Makes sense, right?

There’s more of course, this being economics, the foggy and impure science. Ask your bank or favorite mortgage broker what a 1% rise in rates will do to your monthly payments. I won’t be seeing you in the Tim Horton’s drive through, I predict.

Back on earth what does this mean to you? Let’s bring it home.

If you’re thinking of selling your house, the pool of possible buyers shrinks as the mortgage they will qualify for becomes smaller.

If you’re thinking of buying. Buy before the rates go up or be prepared to cut out some of your discretionary spending so you can pay your mortgage.

Here’s the story. Notice the could?

Higher interest rates could be coming sooner, says Bank of Canada governor

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