Are interest rates going to remain low?
The global economy is still very uncertain. Tariffs, global trade, Brexit, "populism" and slow growth in Canada are all reasons that contribute to today's continuation of low-interest rates.
In its 2020 outlook, the Bank of Canada has reinforced this stance on interest rates with many other economists sharing a similar view.
Although the last Bank of Canada meeting did not lead to any change in the overnight lending rate, there is some speculation that the overnight lending rate will be reduced in 2020. This means that interest on variable rate mortgages will also be reduced.
Is a recession coming?
The market moves in cycles of both booms and busts. Circumstances contributing to low-interest rates today are not permanent which means consumers need to be cautious about taking out too much debt in low-interest-rate environments.
One of the main problems with having a personal debt level of 177% (StatsCan 2019) is a rise in increasing debt levels due to a low cost of borrowing.
In situations where the Government is forced to keep interest rates low, a later, sudden rise, can trigger payment shock, delinquency, bankruptcy and even foreclosure of real estate.
What should be a borrower's plan in 2020?
Generally, borrowers should always try to be proactive in reducing their cost of borrowing by not overpaying on credit products and minimizing their use.
There are many different ways a borrower can use financial tools to their advantage including debt consolidation through refinancing, balance transfers to low-interest cards, and better budgeting.
It's also important to consider that in times of a recession, property value tends to diminish and to refinance, the property value must be supported.
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Sarah A. Colucci, Mortgage Agent
Mortgage Edge, Broker 10680
Direct: (647) 773-4849
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929