Homeowners may take a cue from Canada’s federal government as it positions itself to eliminate deficits through an austerity program intended to contain spending. With governments struggling to reign in spending, managing household debt is an issue as pertinent to the fiscal health of the individual as it is to governments. Utilizing a home equity line of credit to service existing debt can be an effective means of cleaning up household budgets.
On a positive note, the Financial Post reports that last year’s budget deficit was 13% smaller than anticipated. They also cite a recently released report from Toronto-Dominion Bank economists projecting that government budget balances are “set to dramatically improve” on the expiration of stimulus measures “involving everything from infrastructure spending to home-renovation incentives.”
However, the report from TD’s economic team identifies three independent factors which will impel and challenge federal and provincial governments to reign in spending growth: the intense fiscal challenges faced by our big trading partners (particularly the U.S,. one presumes), our aging population, and rising interest rates.
These three macroeconomic factors naturally impact Canadians on the individual level to a greater or lesser extent. Job security in an export-intensive economy such as Canada’s is more tenuous in times where economies in our export markets are struggling. Retirement savings become evermore an issue in an aging population, and all homeowners are necessarily impacted by rising interest rates.
While there is little or nothing that individual homeowners can do about the first two of these factors, debt consolidation is an effective measure that may be taken in the face of pressures from rising interest rates. Households with high interest consumer loans and/or carrying credit card balances month-to-month can take advantage of currently low interests by consolidating their existing debts under a lower interest, home equity line of credit.
