For those struggling with debt, the struggle just became that much harder. The Bank of Canada interest rate increased again on January 17, 2018, going up to 1.25% — the highest it’s been in nine years.
BOC interest rate hikes started in July of 2017 when the rate went from 0.5% to 0.75%. It increased again in September of 2017, reaching 1%. Interest rates held steady until the January 17 announcement.
Now that the BOC interest rate has increased again, it means Canadian household debt is in that much more of a precarious position. Already, some were questioning whether the Bank of Canada increases were too much for some Canadians to handle. The interest rate increase affects all forms of debt — mortgage, car payments, student loans, etc. So, if a Canadian was already overloaded, the BOC interest rate increase could make the difference between sinking and swimming.
While BOC said it would remain cautious for future increases, it also said to expect more hikes in 2018. The next BOC interest rate announcement is scheduled for March 7.
If you’re already struggling with debt, the Bank of Canada increase could make paying it off that much harder. So, what can you do?
- Take stock of your situation
Take a look at your debt — all of it — and see how much you’re paying in interest each month. What will another 0.25% added on to that look like? Once you have an idea of how much you’re paying each month, you can begin to move forward. One upside of the interest rate increase is that if you have savings invested, you could now be earning higher amounts of interest.
- Make a plan
The time to act is now — not after the next BOC interest rate increase. BOC has indicated there will be more in 2018, so if you can get your debt down sooner rather than later, it’s in your favour. Whether it’s creating a personal budget, finding a way to earn more income, or paying off your highest-interest debts first, the best defense is a good offense.
- Talk to a financial professional
You don’t have to do this on your own. If you’re not sure how to handle this BOC interest rate increase, or further hikes down the line, a financial professional can help you explore your debt consolidation options. If your debt is out of control, you may want to look at Consumer Proposals or Bankruptcy as an option. A Licensed Insolvency Trustee can help you choose the best course of action for your specific situation.
At Fuller Landau Debt Solutions, our team of experienced Licensed Insolvency Trustees takes a personal approach to personal debt. We help you take stock of your situation and find the best way out. Contact us today for a free consultation. Call (416) 927-7200 or visit www.fullerdebt.com.