A day doesn’t go by when someone doesn’t ask me if interest rates are going up or down. Is there a correct answer to that question? Who really knows? Depending on which ‘expert’ you talk to, there’s a good chance you will get a different answer every time.

Reports in the news lately say Canadian household debt is higher than ever. Although the Bank of Canada is keen on doing something about it by raising interest rates, some experts say now is not the time as the global economy is too weak.

Any increase in interest rates will definitely affect those with variable rate mortgages and lines of credit. If you are planning on renewing your mortgage or you are buying a home make sure you do your homework when you decide on which mortgage product you choose. For example, some lenders offer a split mortgage where it is split between a fixed rate and variable rate mortgage.

Some economists are predicting rates won’t increase until sometime in the second half of 2013. Mark Carney, head of the Bank of Canada said he would give the public ample warning of any interest rate hikes. Historically when rate hikes occur many consumers who were thinking of refinancing jump in and do it before the increase or home buyers take less time to make their home purchase decision. Lenders are very aggressive with their lending practices just before any increase in interest rates.

What I find interesting is the central bank increases rates to slow the borrowing by consumers over the long haul but it has the opposite affect short term as it pushes consumers to borrow more before the rates go up.

Not an easy task, controlling the interest rates, to make sure it helps the economy, and not hurt it.

What’s the old saying, ‘Damned if you do, damned if you don’t’.

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