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www.insideHALTON.com · OAKVILLE BEAVER Thursday, July 26, 2012 · 12 Volunteer, feel great! Make a difference in people's lives. Rising interest rates can negatively impact financial health Dollars & Sense By Peter Watson The wild card that will affect most Oakville investors is interest rates. It is difficult to see that now, but Best Buy CORRECTION NOTICE when interest rates increase the NEWSPAPER RETRACTION FOR THE BEST BUY resulting fallout will seem so logiJULY 20 CORPORATE FLYER Please be advised that cal. this product: 7" Samsung Galaxy Tab 2 (WebCode: In Canada, the good news, for 10206559) advertised on the July 20 flyer, page 1, may not be available for purchase in select stores now, is that interest rates will remain due to limited inventory and delays in shipment. the same. We sincerely apologize for any inconvenience this may have caused our valued customers. Last week, Mark Carney, the governor of the Bank of Canada, Bring this AD & get an additional announced there would be no change % OFF in the benchmark interest rate. Regular Price Governments attempt to control SHOP ONLINE www.hotspotautoparts.com economic activity and one of the best Hours: Mon. - Fri. 8 - 5, Sat. 8 - 2 Huge Discount tools to achieve that control is by for Commercial Accounts A/C Refrigerant A/C Recharge Kit changing interest rates. $ 49 $ 89 Low rates encourage spending A/C Compressor A/C Condenser because the cost of borrowing is $ 99 $ 99 lower. from from Economy Premium Carney has been publicly con$ 99 $ 99 Brake Rotors or Drum from from cerned with our current, and hisEconomy BCA/National $ 95 $ 99 torically, low interest rates and he Hub Bearing Assembly from from has issued warnings over the last Economy Moog $ 99 $ 79 several years. Ball Joint from from His warning last week is that the Monroe-Sensa Monroe-Matic tracklifetime warr. 1yr. warr. next interest rate move in Canada is $ 99 Shocks $ 99 from from more likely to be an increase. Monroe-Sensa Monroe-Matic tracklifetime warr. 1yr. warr. Higher interest rates will have a $ 99 $ 99 Struts from from negative ripple effect on investors. Economy Wagner ThermoQuiet That is normal. $ 99 $ 95 Brake Pads from from Higher interest rates are a way of Harvester Rd. #11B 905-544-2444 cooling off a hot economy. Burlington 5115 (East of Appleby Line) This year the Canadian economy www.ymcaofoakville.com "The value of your house that has been part of your retirement planning could be worth less and that could impact your ability to maintain your desired lifestyle during retirement." housing more expensive to own; therefore, some may not be able to afford to purchase a house at the current high-selling prices. That is not as important for a young family. If they move, their house would decline in value but the purchase of a new house would be less expensive. Unfortunately, for retired homeowners who are downsizing or selling a house to go to rental accommodation, a decrease in their house value is more harmful. The value of a house that has been part of your retirement planning could be worth less and that could impact your ability to maintain your desired lifestyle during retirement. In simple terms, real estate is an investment and all investments can increase or decrease in value. 5 9 169 11 39 12 29 89 24 79 24 19 39 29 51 9 24 did not need cooling-off because it has been negatively affected by the European financial crisis and lower world commodity prices -- especially lower oil prices. The booming economies of India and China have slowed down, which has resulted in a lower demand for Canadian resources. Economies ebb and flow. When economic activity increases, an interest rate increase is extremely likely. This, however, may negatively impact individuals. Those most significantly affected will be homeowners in their retirement years. Houses, like most other items, are purchased based on affordability. With rock-bottom interest rates, we could all stretch to buy a house. Higher mortgage costs will make A second potential fallout from decreasing interest rates is that the value of the bonds in your portfolio could decrease. If you have long term bonds at lower interest rates, new bonds being issued at higher interest rates will make your bonds less attractive and, therefore, decline in value. Is this column meant to be an alarm? No, but it is a warning. Interest rates do change and if the governor of the Bank of Canada is correct and the next interest rate change is an increase, then that could hurt you financially. A small increase in interest rates will be less harmful. However, if interest rates return to something even close to historic levels, the impact will be significant. That is the risk. Our suggestion is to speak with your financial advisor and consider the impact on your financial health if interest rates do increase. Understanding the potential risks will help you better understand what could be done now to lower your exposure to an interest rate increase. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Visit www.cogeco.ca/tmncontest for details on how to win an invitation to one of the most exclusive film events of the year! *certain restrictions apply