The Bank of Canada (BOC) announced last week, on April 24, 2019, that it would not be raising its overnight interest rate. Instead, the rate is staying at 1.75% for the time being – and potentially the foreseeable future.

Between July of 2017 and October of 2018, the BOC increased the interest rate from 0.5% to 1.75% and was forecasting more hikes to come. However, due to several economic factors such as global trade uncertainty, oil price declines, and a weaker-than-expected Canadian housing market, the BOC is tempering its interest rate approach.

“Governing Council judges that an accommodative policy interest rate continues to be warranted,” the BOC stated in the April 24 release.

“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive.”

Many economists are speculating that another interest rate increase won’t happen until at least 2020 – which is good news for Canadians who are facing high-interest debt.

A break in interest rate increases is the perfect time to get out of debt and repair bad credit.

Here are some of the debt consolidation options you might consider:

1. Mortgage refinancing.

With interest rates staying the same for the time being, homeowners may have more wiggle room in their home equity. For instance, if you have equity available, you may be able to refinance your mortgage at a lower interest rate now than if you were to wait.

The BOC also expects the Canadian housing market to pick up in the second half of 2019, which could be good for property values. As spring and summer home sales start, now may be the perfect time to look into refinancing your mortgage to get out of debt.

2. Debt consolidation loan.

A debt consolidation loan is an alternative to mortgage refinancing that works well if you don’t have home equity available. It’s especially helpful if you are carrying high-interest debt, like credit cards, outstanding utility or cell phone bills, or unsecured lines of credit.

In these instances, you may have several high-interest debts you want to reduce, but you can’t afford to pay them all off at once. And the longer you wait to pay them, the more interest you accumulate.

A debt consolidation loan gives you the money to pay off all your high-interest loans at once. You then pay back the loan at a fixed interest rate over a pre-determined schedule.

With the interest rate hold, you may be able to access debt consolidation loans at a lower fixed rate.

3. Filing for a Consumer Proposal.

If you are carrying too much high-interest debt to pay off, even with a debt consolidation loan or mortgage refinancing, you may want to consider filing for a Consumer Proposal. In a Consumer Proposal, you make a proposal to your creditors to settle your debts for a lesser amount.

While a Consumer Proposal can be filed at any time, regardless of what is happening with the BOC interest rate, there is an advantage to filing when interest rates are on hold: credit repair.

If you have a bad credit score, you can start rebuilding credit by taking out secured loans. While these typically come with fixed-rate interest payments, the rate you get might be lower than it would be if the BOC interest rate kept rising.

As well, when you file for a Consumer Proposal, there is a limit of $250,000, not including your mortgage. If an interest rate increase would put your debt at over $250,000, it’s a good idea to file sooner rather than later. If you have more than $250,000 in unsecured debt, you might consider filing for Bankruptcy or a different type of proposal.

4. Filing for Bankruptcy.

Like a Consumer Proposal, you can file for Bankruptcy no matter what is happening with BOC interest rates. But the advantage to filing now is, again, credit repair.

And while interest rates may not be on the rise in the near future, they’re not going down either. So, if you are having trouble with the current rate, it’s important to deal with it before it becomes even more unmanageable.

The next BOC announcement is scheduled for May 29, 2019.

At Fuller Financial Solutions, we help find the financial solution that’s right for you. No two people are the same; our Licensed Insolvency Trustees take your entire situation into account and present all your options.

Contact us today for a free consultation. Call 416-927-7200 or visit www.fullersolutions.ca.