There may be speculation that the Bank of Canada could make a second cut to interest rates this year as early as this Wednesday but eventually those rates are going to rise. A new poll by BMO says that almost two thirds (64 per cent) of Canadian households would be impacted by an interest rate increase. The mortgage lender’s annual debt survey also found that average Canadian household debt is $92,699; slightly up on the four year average of $88,303; and servicing that debt costs on average $1,165 per month. Optimism of being in control is high though with 59 per cent believing that they will clear their current debts within 5 years or less. However almost half plan to take on additional debt in the next year.
BMO advises keeping amortization periods for mortgages and other borrowing as short as possible especially considering volatility in the global and domestic economies. The lender’s Christine Canning commented that low interest rates make borrowing attractive but warned “rates will inevitably rise to normal levels, so it's becoming increasingly important that Canadians stress-test their ability to afford the debt they currently have so they can effectively manage their finances in a higher rate environment."
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