Interest rate cut may spur big purchases, but experts urge caution

If you’ve been holding off on some big purchases until the Bank of Canada interest rates started falling, you’re not alone — but credit counsellors are warning you to think twice before pulling out the credit card or taking out a loan.

“Where I’m hearing it the most is rumblings around real estate,” said Anne Arbour with the Credit Counselling Society. “If people have been waiting for something to shift, this might be all that it takes to push you into that purchase.”

While the Bank of Canada cut its key interest rate Wednesday for the first time in four years, a quarter of a percentage point might not make much of a difference, and Arbour hopes most people realize that.

“If you’ve been waiting and know where your numbers are at — what your capacity is to borrow — and this is what you’ve been waiting for and planned for, then great. I don’t think it’s something where we are moving back to where we were a few years ago where people were all of a sudden jumping in and not thinking about it,” she told CityNews.

“There are too many other factors in the economy — groceries and gas and all those other pieces of day-to-day inflation that are still affecting people’s spending.”

Arbour encourages people to know what their household budget can, or can’t, absorb, but admits she’s seeing “a whole new group” of consumers starting to struggle.

“Maybe they could tread water before but even with interest rates aside, given the way groceries and gas are now, it’s getting tighter and tighter and they are not necessarily able to have the flexibility they had before.”

She warns against going into any kind of borrowing situation without a close look at the long-term implications of taking on more debt.

“If you don’t have a plan to pay it back, it can get you into trouble. Be aware.”

Arbour says if you are feeling financial stress, there are supports.

“There are not-for-profit credit counselling agencies like ours where it’s a free phone call. We are neutral on the topic, so just getting another opinion on what options are out there and some fresh eyes on your budget, we can talk about it. Don’t be afraid, don’t be embarrassed, don’t be ashamed — we have all been there at one point or another.”

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