Dropping interest rates and what they mean for you…

The Bank of Canada hasreduced its policy rate another 25 basis points and, as of September 4, 2024,now sits at 4.25%.

Why are interestrates dropping?

The Bank of Canada adjusts rates to help stabilize the economy. When inflation rises and/or economic growth slows, lowering rates encourages borrowing and spending and in turn helps to fuel growth. Recent cuts suggest the Bank of Canada is concerned about a potential economic slowdown and sees the need to keep inflation under control. While our labour market continues to slow, price increases in shelter and some other services are holding inflation up.

What does this mean for your finances?

Lower interest rates can impact the average Canadian family’s monthly cash-flows in several way:

• Mortgages – If you have a variable-rate mortgage, you will see a reduction in your monthly payment, which frees up extra cash in your budget.
• Loans and Lines of Credit – Lower rates may also mean relief for these other types of debt, which makes it cheaper to borrow
• Savings Accounts – On the other hand, if you have been relying on savings accounts for interest income you will see lower returns. Now could be a good time to consider alternatives for growing your wealth.

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Strategies to take advantage of lower rates

• Refinance debt: With rates dropping, it may be a good time to consider refinancing your higher-interest debts. This can result in lower monthly payments (which frees up cash for other goals) and/or helps to achieve debt freedom that much sooner.
• Invest for growth : Lower savings account ratesmay push you to consider other investment options. There are ways you candiversify your portfolio to ensure your money continues to grow, even in alow-interest rate environment.
• Plan for the future: Interest rate changes canhave a large impact on your long-term financial plans. Whether you are nearingretirement or just thinking ahead, it is a good idea to reassess yourstrategies and cash-flow needs

What should you do next?

Interest rate changes present both opportunities and challenges. It is therefore very important to understand how they impact your unique financial situation so you can make informed decisions. If you are unsure how to proceed, please reach out to our team at Endeavour Wealth Management to discuss a personalized plan that can keep you on track.

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This information has been prepared by Ryan Secord who is a Senior Investment Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

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