How You Can Protect Your Wealth From Rising Interest Rates and Weather The Storm
To stop the inflationary spiral, the Bank of Canada hiked the Bank Rate.
How can families protect themselves?
It would be beneficial to consider moving to investments with greater interest rates and locking in to a low mortgage rate while they last.
Instead of panicking or giving up, a spike in interest rates should serve as a reminder to assess your finances. Here are some steps homeowners and investors can take to withstand the storm.
Switch to the best savings deals
Traditional savings account holders have been harmed by low interest rates for an extended period of time, and the majority will have seen their value eroded by inflation over the past year.
However, by transferring their funds to shorter-term investments with greater yields, savers might mitigate some of the harm brought on by the increase in living expenses. MCU offers competitive pricing that is among the best in the financial industry to give more back to our members.
Long-term investments typically prohibit early withdrawals therefore locking your money away for an extended period of time may not be the wisest course of action given that rates are anticipated to rise further.
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Remortgage to a low rate while they last
After each rate increase, lenders pass along the new rates to mortgage borrowers. The cost of mortgages and loans continue to increase.
The monthly mortgage payments for millions of consumers with variable-rate mortgages keep going up. In contrast to fixed-rate agreements, rates for these homeowners are erratic.
It is projected that because standard variable rates are often the most expensive kind of mortgage, today’s hike will be promptly passed on to these clients. Those whose contracts are about to expire have been urged to remortgage as soon as possible. Experts have recommended borrowers to switch to a fixed-rate agreement if they have reverted to their lender’s usual variable rate.
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Pay off debts if you can
Additionally, higher interest rates imply more expensive loan payments. Before interest rates rise higher, savers with cash on hand should give priority to paying off high-interest debt.
If you have credit card debt that needs to be paid off, switching to a low interest line of credit or using a HELOC can significantly lower interest and offer you more time to pay it back.
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In Conclusion
You do have choices to think about when rates are rising. If you can maintain your composure, minimize your exposure to danger, and recognize that this is a natural cycle, you can find ways to benefit. We recommend members always speak to an investment advisor to obtain professional advice that suits your specific financial situation.