There is an expectation that the Bank of Canada's interest rate hikes that we've seen over the past year or so, may be nearing an end.
Larry Davey is the President and CEO of Access Credit Union. He feels a majority of the big increases have already ended.
"Could we still see a quarter-point here, a quarter-point there? Potentially," he said. "What's been positive is, we've seen inflation trending downward and the job market staying stagnant. There was a big jump in new jobs that were filled in December, so that could mean the Bank of Canada could raise rates by a quarter-point in January, but I believe the consensus is that we are at or pretty close to the top."
The strategy behind the Bank's rising interest rates has been to try and curb inflation in the country. We asked Davey if he thought the strategy was working.
"It does seem to be coming through the way the Bank had anticipated," he said, noting the process always seems longer than what most hope for. "But at the same time, we had a very very low rate environment for a long time, and we've had an increase in rates in the past year. So, how long it will hang around...the consensus appears to be over the next couple of years rates should trend downward."
For those who held variable rate mortgages during the past year or so, Davey says they will have been impacted slightly by the increases but notes, their income should have been able to deal with most of it as they had to qualify for a higher rate at the time they took out their mortgage - a sort of safety net.
Those with 5-year mortgages coming due now, Davey had this to say.
"They were at, probably, high-3s/low-4 percent when they took out their mortgage, and rates right now are a little over five-and-a-half for a five-year mortgage, so that is a bit of a jump. That said, most of those people will have likely seen income increases over the last five years, so there is a lot of sort of safety nets there," he explained.
There is also the option of going back to their financial institution and extending the mortgage's amortization.
As for prospective home-buyers, Davey says they need to review their comfort zone.
"Do I feel comfortable going into variable hoping rates might drop and knowing they could still go up? Do I feel comfortable in locking in a five-year knowing that I've probably benefitted with a reduction in the home price over what I would have had to have paid a year ago?" These are just two of the questions Davey suggests prospective home-buyers consider, noting home prices are down slightly in Manitoba.
As for what a potential pause in interest rate hikes could mean for investments, Davey says it always comes back to peoples' comfort level.
"If you're only comfortable with GICs and you want everything to be one hundred percent guaranteed, then you should be maintaining your money is GICs. If you have a bit of a risk tolerance, you might want to split your money between GICs and the market or, if you have a higher risk tolerance, you could put more money into the market," said Davey.
At the end of the day, if you're dealing with a decent amount of money, Davey suggests connecting with one of Access's financial planners to help determine your risk tolerance.