Where’s the science you ask? That’s a good one. Here’s how I understand it. The interest rate helps control inflation. If the supply of money is (near) freely available from lenders, consumers will borrow more and thus spend more therefore driving the prices of (certain things like houses but maybe not cars) up. Makes sense, right?
There’s more of course, this being economics, the foggy and impure science. Ask your bank or favorite mortgage broker what a 1% rise in rates will do to your monthly payments. I won’t be seeing you in the Tim Horton’s drive through, I predict.
Back on earth what does this mean to you? Let’s bring it home.
If you’re thinking of selling your house, the pool of possible buyers shrinks as the mortgage they will qualify for becomes smaller.
If you’re thinking of buying. Buy before the rates go up or be prepared to cut out some of your discretionary spending so you can pay your mortgage.
Here’s the story. Notice the could?
Higher interest rates could be coming sooner, says Bank of Canada governor
