While interest rates have been stable for the past few years, since 2010 to be exact – many thought that these rates were going to rise in 2015.
There have been reports that the Bank of Canada will increase interest rates around the middle of the year, looking at May as a potential timeframe. In January, the Bank of Canada surprised the market and actually decreased the interest rates to 0.75%. This was a completely unexpected move. Market analysts still state that an increase could happen later in the year so the stability of interest rates if still unclear. Even if these rates increased, these rates are however, not supposed to increase drastically, with 0.5% being the likely value hike. Compared to the high interest increases seen back in the 1980’s – a time when Canadian’s saw a shocking change, these rates may not prove to be as unmanageable.
The reasons that interest rates are said to be increasing now, are because the country has shown signs of growth and recovery, with a higher inflation sparking higher interest rates. The negative side of this picture, which may pose a threat to these upward movements, is the lower oil prices, which can drive down inflation. Additional threats that may also deflate the recovery rate, is the high volume of debt accumulated in Canadian households during the previous years of low interest borrowing.
What will a potential Increase mean for Canadian borrowers?
Despite the slight rate hike, Canadian borrowers will still except to experience some overnight effects. It is speculated that business owners will be more negatively impacted. Ultimately, however of those who are more likely to feel a greater impact are those with loans with variable interest rates. Those with fixed loans (rates that remain the same for the duration of the loan term), may not notice this as strongly at first.
In terms of car loans and mortgages, borrowers will certainly see their borrowing rates increase. Those who are in the market for a new car may experience some added difficulty when shopping around for loan terms and rates that are affordable for them. Ultimately, for those with high levels of debt, there may be more serious implications.
The reality of it is that borrowers with high debt levels may also experience poor credit situation. This in and of itself can make it challenging to secure a car loan in the first place. For this reason, there are a variety of lending groups and credit sources that are opening their doors and services to a wider spectrum of credit situations. While many traditional banks tend to only offer loans to borrowers with stronger credit, in the event that they do provide loans to individuals with lower credit scores, interest rates and loan terms may not be as favourable.
This certainly poses an additional barrier to loans borrowers when they have debt and still need a car in their lives. At this point in time, people may feel out of options and as a result want to give up – however looking to alternative sources for credit is an option that bad credit borrowers and those struggling with debt can pursue.
Canada Drives can help individuals secure car loans by facilitating these loans through a group of lenders that they have a previous relationship with. Worrying about obtaining a car loan in the first place and with the added hike in interest rates on the horizon, potential car owners have a lot more to think about.
Alternatively, let Canada Drives lift this burden off of your shoulders, by helping you connect with a lender who can help you with the loan process. They will look at your individual case and help you achieve a desired loan agreement that is right for you.
For those of you looking to buy a car, while you should not feel the need to rush into anything you are unsure of, perhaps looking to secure your vehicle financing now before the rates increase could help you save some money over time.
If you are able to take out a fixed loan, when interest increase, you may not feel the same level of shock when the rates move upward. On the other hand, if you already have a car loan, ultimately you will want to think about how your monthly payments may go up. Factoring in this piece of information, it makes sense to consider all of your options. Our team of professional at Canada Drives can help you learn more about the car loan options available to you, even if interest rates increase. Canada Drives can help to connect you with a lender who will provide you with greater ease in securing that loan and lower the overall financial stress of financing your next car.