Interest rates will stay low for long. How will it affect you?

As you know, the central bank has kept its overnight rate unchanged at 0.25%, and it’s expected to remain that way for long – at least, until we see a 2% inflation. The new Bank of Canada Governor Tiff Macklem showed certain optimism, saying the worst of the virus could be already over. Nevertheless, it doesn’t mean there’s no need in massive financial support. Although the national economy is expected to reduce by 7.8% this year and expand by 5.1% in 2021, it will still take two years to recover.

So what does this all mean to you? How can it affect your situation?

• In case you’re planning a home purchase, the interest rates will remain low for longer. It concerns both fixed and variable mortgage rates. As a result, the real estate market will receive the necessary support, as it starts to rebound.
• If you have large debts, the lower rates will help you cope with this problem and pay the debt down sooner. Individuals and small business owners have faced sharp debt growth. In case you have a property with enough equity, it could be your chance to refinance and repay the debt faster under lower rates.
• For those who have saving accounts, it’s time to consider other options, for instance, choosing corporate bonds of good quality companies instead of Government of Canada bonds. Retirees who rely on interest and dividend have been facing hard times, and it’s not expected to change in the nearest future, so it could be a good idea to re-evaluate retirement planning.
• If you are unemployed and receiving the CERB, which will probably end this fall, you may benefit from the wage subsidy program, which has been prolonged until December as the economy starts to rebound and employers are hiring now.