Rates keep going up and the expectations are that rates will only start coming down again in late 2023 to get us out of a potential recession. How fast rates go up and how quickly will define our economy and politics for years to come. Individuals and families who will head off the higher rate environment and minimize their costs will thrive and prosper in the coming years. Through this higher interest rate environment, please don’t hesitate to keep Tembo’s ability to offer rapid, creative, and innovative lending solutions in mind – whether you’re looking to renovate and increase equity values, or you need to consolidate and simplify your debts, or you need a quick second mortgage for a deposit on a new or additional property. Higher interest rates means greater risks and costs for banks which means slower processing, greater scrutiny, and more limited options.
On Jun. 15th 2022, the Fed raised rates by 75 basis points. This was the highest increase for the U.S. central bank since 1994. Expectations of the BOC doing the same are rising, especially on the heels of the May inflation number set to be released on June 22nd. Looking at our interest rate history, rates are still historically low. From June 2004 to August 2007 when economic conditions were excellent and inflation low, rates increased from 2% to 4.25%. Always keep in mind that the historic norm since the early 1960s has been rates of some 6%, we’re only at 0.50% right now. From 1997 to late 2000, rates increased from 3% to 5.75%. From 1987 to May of 1990, rates jumped from 7.3% to 13.8%. This was in the aftermath of strong inflation and the popping of the late 80s real estate bubble that Tembo has written about many times. Keep an eye on inflation and the BOC and always keep Tembo in mind for a second mortgage, debt consolidation solutions, an equity advance for a renovation loan, and so much more.
So, the conclusion is that when the bank starts to shift to higher rates, it generally sticks to that trajectory over a number of years. There are usually at least a handful of rates over the higher rate period. Increases have historically been .25 basis points, but even in good economic conditions, rates have been occasionally boosted by .50 basis points. In periods of high and growing inflation rate increases are stronger and the ‘higher rate period’ is shorter than in periods of healthier macroeconomic fundamentals. Take advantage of your increased housing equity to consolidate your debts, pay down liabilities fast, and simplify your payments – please visit www.tembofinancial.com and give us a call at 1-844-238-6717!