{"id":12757,"date":"2016-11-02T09:00:30","date_gmt":"2016-11-02T16:00:30","guid":{"rendered":"http:\/\/www.nexusnewspaper.com\/?p=12757"},"modified":"2016-11-01T12:59:03","modified_gmt":"2016-11-01T19:59:03","slug":"matters-of-interest-part-deux","status":"publish","type":"post","link":"https:\/\/www.nexusnewspaper.com\/newsite\/2016\/11\/02\/matters-of-interest-part-deux\/","title":{"rendered":"Calculated Thought<\/em>: Matters of interest, part deux<\/em>"},"content":{"rendered":"

Last issue I voiced an ominous warning to not celebrate low interest rates, as they can be a sign of wobbling economies grasping for growth. And at such extreme lows, rates generally have only one direction to go. If interest rates rise, it shows that there\u2019s confidence in our economy, which hopefully means wage increases and job creation. The general sentiment is that rates in Canada won\u2019t rise soon, but many say that it\u2019s inevitable. When they do, debt will become more expensive to manage.<\/p>\n

So what influences the prime rate tied to your student loans? Most impactful is the central bank\u2019s overnight interest rate, or \u201ckey rate.\u201d The Bank of Canada (BOC) is our central bank; it\u2019s a mostly autonomous Crown corporation. They hold our federal government\u2019s cash; they design and distribute our currency; they manage our financial system.<\/p>\n

\"Calculated<\/a>
Calculated Thought<\/em> is a column dealing with student finances that is featured in every issue of Nexus<\/em>.<\/figcaption><\/figure>\n

Their main objective is to keep inflation at a \u201clow, stable, and predictable\u201d level, according to their website; two percent is where they like it. The BOC targets inflation through monetary policy, foremost by guiding our economy with changes to the overnight interest rate, which is the rate banks use when they lend, short-term, amongst themselves. The BOC will raise the key rate to cool a hot market when prices rise too quickly and lower it when the economy is stumbling.<\/p>\n

A change in this rate signals banks to follow suit; they aren\u2019t forced to react, but to stay competitive, they normally adjust their prime rate in tandem.<\/p>\n

Currently, our key rate sits at a historically low 0.5 percent. With these low rates in place, businesses are, ideally, investing in new projects that create jobs, and consumers will access cheap credit to finance purchases to keep consumption chugging along. It would seem the latter is happening more than the former, particularly with residential mortgage debt.<\/p>\n

Greater numbers of mortgages accessible through cheaper credit increases demand for houses, causing prices to jump.<\/p>\n

It\u2019s not all bad\u2014if interest rates and house prices have an inverse relationship, as the data would suggest, maybe rising rates over the next decade will mean (relatively) cheaper houses for us students by the time we\u2019re ready to buy.<\/p>\n

Hey, we can always dream.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last issue I voiced an ominous warning to not celebrate low interest rates, as they can be a sign of wobbling economies grasping for growth. And at such extreme lows, rates generally have only one direction to go. If interest rates rise, it shows that there\u2019s confidence in our economy, which hopefully means wage increases […]<\/p>\n","protected":false},"author":2,"featured_media":12581,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5,174],"tags":[],"class_list":["post-12757","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","category-november-2-2016"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/12757","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/comments?post=12757"}],"version-history":[{"count":6,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/12757\/revisions"}],"predecessor-version":[{"id":12767,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/posts\/12757\/revisions\/12767"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media\/12581"}],"wp:attachment":[{"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/media?parent=12757"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/categories?post=12757"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nexusnewspaper.com\/newsite\/wp-json\/wp\/v2\/tags?post=12757"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}