The Positive Side of Rising Interest Rates

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With the impending hike in interest rates many people have been trying to lock in their mortgages at the lowest rate they can find. Granted, this makes sense as it allows a greater portion of your payments to go towards the principal balance, not just towards the interest. However, there are some positive aspects about increasing rates which should be considered.

John Heinzl, of the Globe and Mail, mentions a few of the upsides in his article. Firstly, home buyers will qualify for smaller mortgages which means people won’t be able to place bids far above the asking price of the home and bidding wars will settle. Secondly, the U.S. Federal Reserve Board is planning to keep the hold on their interest rates which will add to the strength of the Canadian Dollar. Although Canadian exports will be affected, travel to the U.S. will be cheaper than ever.

In addition, the increase in rates will help those who are saving for a down payment on a house as more money can be earned from GIC’s and from bonds, whose yield’s will also show an increase as the Bank of Canada hikes the interest rates. For those who prefer to invest in the stock market, stocks prices are likely to decrease and readjust due to higher interest rates. This may leave you with a negative perspective however, the fall in prices becomes the perfect opportunity to acquire new assets and invest in promising stocks while the prices are low.

There are two sides to every story and although many are discouraged by the inevitable increase in interest rates rates, there are new opportunities becoming available to Canadians which should not be overlooked.