How to Afford Interest Rate Changes for Homes for Sale in Kelowna BC

Since 2022, interest rates have been fluctuating, causing a point of concern for many Canadian residents. With rates trending upwards, Kelowna homeowners have found it challenging to hold on to homes for sale in Kelowna BC. This is especially true for those with variable-rate loans or loans that need to be renewed. The Bank of Canada held its key interest rate at 5% again in March, and there has been no clear indication of when cuts will occur. Although, we eagerly await news of rate cuts on the horizon, potentially this June.

Regardless of when they happen, it’s important to know how to navigate high interest rates in the interim. Although it’s expected that rates will be cut sometime in the near future, the Bank of Canada noted that it could still raise rates further should inflation unexpectedly rise. In this article, we will provide some advice on managing your money in the face of changing interest rates.

How do Interest Rates Work & When Are You Affected Most?

Interest rates are used to calculate the amount you pay to your lender when you borrow a sum of money. For example, a mortgage or line of credit. The person you finance the money, your lender, will use the interest rate to determine how much you will owe them over time. When you sign your loan agreement, the interest rate will be included in the document. However, it’s important to distinguish in your contract whether you have a variable or fixed interest rate.

For those with fixed interest rates, the rate will remain the same regardless of outside economic factors for the term of your loan. On the other hand, a variable interest rate can fluctuate up or down over the term of your loan. 

So, for anyone with a variable-rate loan, a change in interest rates can greatly affect their ability to afford monthly payments. However, the same is true for those who need to renew their fixed-rate loans. Even if you don’t fall into either of these categories, your financial institution could increase interest rates for you if you don’t make your payments on time. 

With so many ways to be affected by changes in interest rates, it’s important to know how to manage in the event that rates rise or fall.

Strategies to Afford Homes for Sale in Kelowna BC When Interest Rates Change

When rates go up, it can be hard to adapt your lifestyle to make up for the higher cost of living. However, with these tips, it can become a bit easier to manage. If you know that interest rates are going to rise, it’s a good idea to start reducing your expenses immediately. This way, when the rate hike happens, you have more money to pay down your debt. One strategy to do so is budgeting in a way that prevents you from relying on borrowed money. Assess your expenses and determine where you can afford to cut back and reduce spending. 

If you have a lot of high-interest debts, like credit cards, you may want to consider consolidating these. This can be done with a loan with a lower interest rate. Doing so will help you manage your debt more effectively and eliminate some of the chaos of paying off multiple debts. 

For buyers looking to purchase a home while rates are uncertain, you should keep a couple of things in mind. The first is to avoid getting the maximum mortgage that a lender offers you. This can quickly become too much if rates rise unexpectedly, potentially forcing you to default on your payments. Secondly, buyers should avoid taking on unnecessary debt for things that they want but don’t need. Buying a home is enough of a financial burden, so until you are able to adjust, it’s best to avoid other sources of debt. 

The last tip we can offer current homeowners is to use your home to create income while rates are high. For instance, consider renting out your home to a long-term tenant to help you afford the additional costs of your mortgage. This will also help relieve some financial stress.

Contact Hilbert&Crick Today!

If you’re interested in learning more about affording your mortgage amidst high interest rates, don’t hesitate to reach out! For more information about buying and selling homes for sale in Kelowna BC, contact us today! We’d be happy to help you find an amazing home that accommodates you and your family’s needs! Be sure to check out our social media for the latest updates and more. And, stay tuned to our blog for more real estate-related information.

We look forward to working with you!