This morning I did a live interview on CKPC New Country AM 1380 here in Brantford; the station now has “all news mornings”, and they wanted a local perspective on interest rates.  This morning the Bank of Canada announced that they are increasing the Bank of Canada lending rate by .25%.

A quarter of one percentage point doesn’t sound like much, but as I explained in the interview, this is the second quarter point increase in the last two months; if rates keep rising, it will make a difference.

Here’s the example I used in the interview: If you have a $200,000 variable rate mortgage, you are paying around 2% interest.  If rates go up by .25%, you will be paying 2.25%, so your monthly payment will increase from $846.90 per month to $871.22 per month.  That’s $24.32 per month, so that’s probably not a big enough increase to make a difference to you.  However, over 25 years, that’s an extra $7,296 in payments.

However, rates are now up half a percent this year, and if they increase another half a percent later this year, that’s a full point increase, which is about $100 per month on a $200,000 mortgage, which is almost $30,000 over a 25 year mortgage term.

Small increases add up to big increases, and that will cause problems for many Brantford residents.  When you combine higher interest rates with the new HST, it’s likely we will all have less money in our pockets as the year progresses.

My advice?  If you have debt, now is the time to start reducing your debt before interest rates rise further.  A consumer proposal is a great way to negotiate a settlement with your creditors if you can’t pay them back in full.  For more information, give me a call in Brantford at (519) 770-4440, or e-mail me, and let’s get started.

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