Lower interest rates no reason to make major purchase, says financial planner
CBC News | Posted: January 23, 2015 7:45 PM | Last Updated: January 23, 2015
Financial planner Janea Dieno surprised the Bank of Canada lowered interest rates
The Bank of Canada surprised everyone in the country by lowering interest rates on Wednesday because of the economic threat posed by dropping oil prices it said.
But what does that mean for the average consumer?
Janea Dieno, a financial planner in Saskatoon, said she was surprised that interest rates were dropped. However, she doesn't think people should go out and make a major purchase, like a big-screen TV or a car.
"So, now that we've seen this drop in interest rates, my fear is that consumers are going to go out and say, 'hey, let's spend, let's go out and buy the boat we wanted, let's buy the new car,'" she said.
She doesn't think it's a good idea because layoffs are looming in some industries, especially oil and gas, and it wouldn't be wise to make a major purchase.
"My recommendation would be build as much as you can up in an emergency savings account, because you don't know whether your job is going to be there," she said.
In terms of houses and mortgages, experts tell people to make sure they can afford the house they're buying. And becoming house poor, especially when rates rise, is a bad idea.
However, mortgage rates are at the lowest they've been in years and locking in now might not be such a bad idea.
"We are, again, at almost an all time low, so for you not to take an all time low, and throw the dice on the variable, a safe betting man would go with a five-year fixed or greater," said Marcel Brossart, of Your Mortgage Link.