The Bank of Canada upped their key overnight rate by 50% this week! How will consumers possibly withstand this huge jump? Yes, that is how I interpret a lot of the talking heads reactions. If the Â¼% increase of this week is impacting your life, you are in some serious trouble financially. Most of the experts are more concerned about the return to less opportunistic rates. It is time to pay off your debt, or figure out where you go from here.
I did like one talking head that pointed out that the passed two rate drops were both Â¼%, however the banks both time only lowered rates by 0.15%, yet most banks have already jumped their “prime” rate by at least Â¼% in reaction. Some banks had already raised their rates, and this is why I own shares in banks (horrible to customers, but good investment). Someone else pointed out that the interest rate on Savings Accounts doesn’t appear to be rising, at some banks.
Remember that other lenders may jump on board as well, and raise their rates. Can your car loan or lease go up? Might want to check the fine print, but your HELOC and unsecured lines of credit are going up.
Is this the cold shower the economy needs to cool things down? No, not yet, if rates return to around 4% then we will see housing markets going into the crapper, but that could be where we are headed. The economy has been stimulated for a long time, time to calm down.
Keep calm and pay off your debts, as I have said so many times before.
What if this is actually similar to the 70’s, wonder what today’s 20 year olds would do if their mortgages were 15% annually, and inflation was running at 10% or higher? Yes, I am just stirring the pot, but still an interesting question.
Is Money too Tight to Mention ? Not yet, but it might head there soon. Still one of my favourite tunes from Simply Red.
Allow me to give an alternate perspective on raising interest rates. Increased interest rates will finally teach a generation about the importance of paying down debt. How does anyone know about the power of compound interest, when rates stay at 2% (a doubling period of 36 years)?
The other interesting topic that I haven’t heard discussed is what does this mean to the biggest debtors, the governments? How will all level of Governments “balance” their budgets with higher interest rates? Higher taxes, is my guess, but I am not an economist.
Writings Past Little While
Haven’t been really writing much, but I have been rewriting and updating a great deal of my back catalogue (well worth checking out). Check out my Twitter feed if you wish to see some of the best of, but I did write about Unlocking Your Phone, What Comes Next? Waiting until December 1st is the first thing, unless you go to the Apple store and buy your phone Unlocked.
I am still astounded that Bell (another terrible to customers, but good investment) hasn’t simple foregone their profits on unlocking, but that is why I am not in marketing.
Some of My Favourite Talking Heads
I know two of them!
Canada 150 a Soggy Bog?
The #Canada150 celebrations here in Ottawa were quite soggy, but it is still a shot in the arm for tourism here in the nation’s capital. It keeps raining here, so don’t look for cheap corn prices any time soon, I suspect this year’s crop is going to be sparse.
- Mark from My Own Advisor brings us some of His Favourite Canadian Dividend Stocks, interesting that I actually still own a few of them, even though I am an Index Investor.
- Mark from 2nd Career Search asks, Why Do Canadians Buy Canadian Mutual Funds? There does seem to be some very expensive ones on the market.
- Tom Drake has re-named his site Maple Money, have a look at his topical post GDS and TDS: How to Calculate Your Debt Service Ratio, over there.
- Robb from Boomer & Echo points out that Your Financial Plan is Your Compass, and you should keep using that to keep you pointed in the right (financial) direction.
- Are there real Arguments Against Index Investing ? Michael James has a look at a few of the more compelling comments from Jack Mintz.
Are you worried about this rate hike, Preet isn’t (yet).
2017 Random Thoughts
- #Canada150, B of C Rates, and #MoneyTalk (June 30th)
- Donuts, Graduations, Summertime and #MoneyTalk #Canada150 (June 23rd)
- Bank Profits, Loose Money, Used House Salesfolk and #MoneyTalk (May 26th)
- Avocado Toast, Victoria Day, Ransomware and #Moneytalk (May 19th)
- RDSP, DTCs, Motherâ€™s Day and #MoneyTalk (May 12th)
- Thanks Prince Phil, More Old Than Young and #MoneyTalk (May 5th)
- MLM, Balanced Budgets, and #Moneytalk (April 28th)
- Overheated Housing Market, Rent Controls and #MoneyTalk (April 21st)
- Ladies on Panels, Good Friday, Friendly Skies, Loose Money and #MoneyTalk (April 14th)
- Tax Time, Housing Bubbles, Financial Easter and #MoneyTalk (April 7th)
1st Quarter 2017 Random Thoughts
- April Fools, High on Life and #MoneyTalk (March 31st)
- Ho Hum Budget, Brackets Busted and #MoneyTalk (March 24th)
- Naughty Banks, March Madness, Big Snow and #MoneyTalk (March 17th)
- Teller Upselling, Auto-filling Taxes, Spring Forward and #MoneyTalk, (March 10th )
- Lent Begins, Loose Money and #MoneyTalk (March 3rd )
- RRSP Season, Tax Time, and #MoneyTalk (February 24th )
- Farewell Vinyl CafÃ©, Snow, Monopoly and #MoneyTalk (February 17th )
- RRSP , Tax , TFSA , RESP, and RDSP Time and #MoneyTalk (February 10th )
- Year of the Fire Rooster, Financial Groundhog Day and #MoneyTalk (February 3rd )
- Alternate Financial Facts, 1984 and #Moneytalk (January 27th)
- Bungled Mortgages, Friday the 13th and #Moneytalk (January 13th)
- Merry New Year, CPP, EI and #MoneyTalk (January 6th)