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www.insideHALTON.com · OAKVILLE BEAVER Thursday, April 26, 2012 · 14 H The negative effect of improving Canadian economy significant source of economic activity and we, Canadians, did our patriotic best to spend our way out of the recession. The good news is our economy is starting to recover. The bad news is that much of our spending was done on credit, subject to very low interest rates. Last week, the Bank of Canada identified the largest domestic risk to the economy and that risk is you. old onto your wallet, the Canadian economy is improving and the negative fallout on families could be significant. There is a chain reaction in the making that will likely result in an interest rate increase. Here is a brief description on how it has evolved. The world was in a recession and our economy slowed down. Consumers account for the most Dollars & Sense By Peter Watson Mark Carney, Bank of Canada governor, held a press conference stating the No. 1 domestic economic risk is household debt. "We've done an analysis, which shows that about 10 per cent of Canadians are vulnerable if interest rates return to more normal levels," said Carney. He also said we have never been as indebted as we are today. Much of that debt is on our house as a mortgage or line of credit. Conservative Canadians have changed. That change towards higher personal debt could cause us harm unless we manage our debt properly. That is not an issue now because the RBC Housing Affordability Index is within historic norms. This will change quickly once these rock bottom interest rates begin to rise. Interest rates will go up when our economic recovery needs to be restrained. It is not a question of `if' but rather `when' rates will go up. This will put downward pressure on house values so the value of your house could decline. Most private sector economists already think that housing prices are high. Minister of Finance Jim Flaherty has tried to slow down the hot housing market within the past six years with three changes to lending policies at the Canada Housing and Mortgage Corporation. Interest rate increases will put downward pressure on house values. Your house could be worth less but your mortgage debt will remain the same and your monthly mortgage payments may increase if you have a variable rate mortgage. That will slow the economy and put pressure on wages, which for many have been growing at less than the rate of inflation. So, your prospects are an income that will grow slowly and your largest asset, which is your house, will be worth less. This is a good time to be proactive. Pay down personal debt such as mortgage and consumer debt. Make use of any pre-payment options available in your mortgage if you have available funds. Consider deferring some spending to reduce debt. If you think your house value might decline, consider downsizing your house now. Purchase a smaller house that is debt free with lower operating costs. Why should you consider making changes now in anticipation of higher interest rates? That will depend on your personal priorities. Plan what you want to accomplish in your life. What priorities are most important? Take the initiative to improve your financial well-being. That will allow you to have the financial resources to do things that are most important to you. It's all about you and how you want to spend your hard-earned dollars. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. FIRST TIME IN BURLINGTON! Join us for a memorable evening to hear Kevin share his many personal investment and business experiences. Kevin will explain how he took key business and financial insights taught to him by his mother and built his empire and why he felt compelled to start his own investment fund management company, O'Leary Funds. Joe and Mary Lindo, and Joe D'Aurizio of Dundee Private Investors Inc. Downtown Burlington present an evening with Internationally recognized investor, entrepreneur, respected commentator, venture capitalist, television personality, and Chairman of O'Leary Funds Chairman of O'Leary Funds, Business TV co-host of Lang/O'Leary Exchange, Cast Member of CBC's Dragons' Den and ABC's Shark Tank, President of The Learning Company which was acquired by Mattel Inc. for $4.2 billion in 1999, Member of Boston's 129-year-old Hamilton Trust. KEVIN O ' L E A RY · Attendance is by invitation only. All attendees must present a ticket at the door. · The first 10 attendees who make a follow-up appointment with one of the sponsoring Dundee Private Investors Inc. advisors will receive a signed copy of Kevin's book "Cold Hard Truth: On Business, Money and Life" WHEN WHERE 7:30PM THURSDAY, MAY 3, 2012 THE BURLINGTON CONVENTION CENTRE, BURLOAK DR., BURLINGTON Call 905-681-6329 or send an email to asmitko@dundeewealth.com to request complimentary tickets to this event. Dundee Private Investors Inc. 29-460 Brant Street Burlington ON L7R 4B6 Tel: 905-681-6329 Toll-free: 1-800-561-6176 This seminar is not intended to solicit clients from other DundeeWealth advisors.