4 strategies to ease the impact of rising interest rates

Borrowing money is a fact of life, as is paying interest on it. So what can you do to ease the impact of rising interest rates, when they occur? Here are four helpful strategies to try.

When you plan for rising interest rates, it's important to take steps to lessen the impact of increased borrowing costs and save yourself money. Borrowing is a part of life and paying interest is a financial consequence of borrowing; however, Canadians may be facing higher interest rates in the future. The best way to limit the amount that is paid over time is to find a way to control interest rates or pay down debt.

People who have variable rate mortgages can be hit hard when interest rates fluctuate. It is difficult to budget for these changes and households that are living on a strict budget may need a more predictable rate. Refinancing is one way to ensure that fluctuating interest rates do not impact mortgage payments.

• Opting for a fixed rate mortgage when refinancing keeps payments steady over the entire life of the loan. You will also be able to see how much you will be paying in interest at the moment you refinance.

When you plan for rising interest rates, research whether rates are expected to drop in the near future and wait to borrow – if necessary. Evaluate the household budget to determine where cuts can be made when mortgage payments are higher.

• Money that is saved when mortgage interest is lower can be put towards the increase in payments during periods of rising costs.

While you have no control over rising interest rates, you do have control over where you stand as a borrower. Lenders offer lower rates to borrowers who have good credit history.

• Work to pay down your debts, make timely payments and completely pay off accounts whenever possible to raise your credit score for the best financing offers.

Having a household budget goes a long way in helping you to control your finances and ensure you don't spiral into debt.

Mortgage brokers are able to help borrowers connect with multiple banks in order to find the offer that is best for their needs.

• Borrowers have the opportunity to compare current interest rates, calculate the total interest paid on a fixed-rate mortgage and ask for advice about managing repayment costs.

Rising interest can put a strain on your budget, but some planning will keep you out of a financial bind. Take the time to review your budget and monthly mortgage costs on a regular basis to ensure that you are not paying too much because of variable interest.