Interest Rates Have Nowhere Else To Go But Up

2010 has been a big year for interest rate increases in Canada. While we have enjoyed low interest rates for the past couple of years, rates have only been low as a result of the economic instability.

If we look back to 9/11 when interest rates were first reduced to historical all-time lows, they started to be incrementally increased in 2005. By 2006 the economy began to show signs of instability and by the following year the Federal Banks returned rates back to historical lows. In the US the Fed reduced the lending rate down to 0%.

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So what does it mean to your average Canadian household when rates go up? Inflation is what happens.

We learned from what happened when the economy collapsed, how much everything revolves around the financial sector. If the Bank of Canada raises its interest rates, the financial institutions have to follow suit if they want to maintain their billion dollar profits.

When the cost to finance goods rises, so does the cost of goods. As long as the economy tolerates rate increases, they will continue to rise. If the economy collapses, the BOC will have no choice but to reduce it again. It's kind of a no win situation as low national interest rates indicate economic instability and high interest rates indicate that you are likely feeling the impact of a higher cost of living.

So what can you do?

Look at existing credit owed to loans and credit cards, the interest rates and the likelihood of you paying the accounts off in full in the near future. If the rates are high and you don't see yourself paying them off in the near future consider pursuing a debt consolidation. The top two types of debt consolation that we recommend are:

1. Prime rate line of credit. A prime rate line of credit can offer you an rate as low as a mortgage interest rate. They bear a low minimum payment obligation and are a very flexible credit product. You will need to have good credit and a strong financial profile in order to qualify.

2. A home equity loan. Refinancing your home is an effective way to consolidate debt if you negotiate the right terms. Pay attention to your mortgage amortization. Make sure when refinancing that you reduce your mortgage amortization by 3 years of what it was before the refinance. This will offset the fact that you are financing consumer debt out over the life of your mortgage. Even those with poor credit qualify for home equity financing if they have enough equity in their home.

For more information about what you can do when interests rates rise visit http://www.trueassess.com.

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