When it comes to interest rates, the worst is over as the Bank of Canada's cuts will give people relief with their personal finances overall, an investment adviser says.
"It's only going to get better over time," said Paul Shelestowsky, a senior investment adviser at Meridian from Niagara-on-the-Lake, Ont.
Lower interest rates tend to result in lower borrowing rates, he said, expecting relief for those with credit card debt, home equity line of credit, variable rate loans or any loans tied to the Bank of Canada's key interest rate.
The central bank reduced its rate to 4.25 per cent on Wednesday, the first time it has slashed the rate for a third straight time since the 2009 global financial crisis.
"It almost feels like for the last couple of years, there's been so much pressure on our dollars from the inflation that now ... we can actually get some breathing room into our personal finances," Shelestowsky said in a video interview with CTVNews.ca on Thursday.
"I think we're really just seeing the beginning of the relief, but over the next six to 18 months, Canadians should expect to continue to see more relief coming in terms of what they're borrowing and more ability to save and pay down debt."
In the wake of the Bank of Canada's latest rate cut, he advises people to watch their budgets and think about where they want to deploy their extra cash.
Do you want to use it to pay down debt, refinance it to get a lower rate, or put funds toward savings or long-term investments?
"Everybody's situation is different, but definitely use this time to take advantage of revisiting your budget, revisiting your income versus your expenses, paying down some debt that's at a higher rate," Shelestowsky said.
"So there's certainly a need to refocus on your finances in a falling interest rate environment, (whereas) in a rising interest rate environment people are just trying to keep their head above water."
Savings rates
Meanwhile, the BoC's rate cuts don't tend to boost savings rates, such as for savings accounts and Guaranteed Investment Certificates (GICs), he said.
"For the people that are saving, they're also going to feel quite a bit of pain because the savings rates have been coming down pretty steadily," Shelestowsky said.
Under the falling interest rate environment, he recommends bonds.
"It's a great way to keep your investments going without taking on much more risk."
While falling interest rates are meant to reignite the economy, it hasn't reignited the housing market yet, Shelestowsky said.
"It's not a seller's market yet," he said. "It's still a buyer's market, but as interest rates come down, that means more people can qualify for a mortgage which will bring up demand for housing."
As a result, he expects housing prices to rise along with the demand.
