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rmorelan

Bank of Canada Rises Rates - again!

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3 hours ago, rmorelan said:

and there was the official announcement of the expected rate increase, with possible projections of another one or two increases further this year. 

 

Yea.. I read somewhere that there are speculations of the BoC targeting 1.75%-2% by the end of the year - averaging about an .25p.p. increase/qtr

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13 minutes ago, la marzocco said:

 

Yea.. I read somewhere that there are speculations of the BoC targeting 1.75%-2% by the end of the year - averaging about an .25p.p. increase/qtr

something like that - the economy is moving ahead at a surprisingly fast pace, so if you had to pick a time to restore the interest rate to a more normal level now would be it I suppose. Be careful with those LOCs out there 

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On 4/5/2018 at 0:22 PM, la marzocco said:

"Our view is that the Bank of Canada will hike its overnight rate to 2.25% by the first half of 2019 and we expect longer-term rates to rise in tandem.

http://www.rbc.com/newsroom/_assets-custom/pdf/20180405-ha.pdf

This would mean the big banks' prime is going to be about 4.45%. The LOCs will be going at about 4.2% give or take.

About to start residency and from the looks of it, seems like a better idea to use any extra money I earn to pay down my LOC rather than putting it into a TFSA.

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9 hours ago, FMinterview said:

About to start residency and from the looks of it, seems like a better idea to use any extra money I earn to pay down my LOC rather than putting it into a TFSA.

We are heading back to more normal rates now - I have to say I a bit worried of the impact it will have for people going through now (higher tuition rates than what I paid not that long ago - as in 10K extra a year even which is just nuts - plus high interest rates). 

It is all dumb luck but I am extremely happy from that aspect that I went through when I did - low rates, lower tuition, more tax credits...

Give it some thought and figure out what is going to work for you.

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3 hours ago, rmorelan said:

We are heading back to more normal rates now - I have to say I a bit worried of the impact it will have for people going through now (higher tuition rates than what I paid not that long ago - as in 10K extra a year even which is just nuts - plus high interest rates). 

It is all dumb luck but I am extremely happy from that aspect that I went through when I did - low rates, lower tuition, more tax credits...

Give it some thought and figure out what is going to work for you.

And decent match rates.... the "golden age" of medical education haha

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57 minutes ago, PhD2MD said:

And decent match rates.... the "golden age" of medical education haha

Ha - you know that is what we said about the people before us :) Even lower tuition, still low rates, newspaper screaming we need more doctors now, nobody trying to cut fees on everything every single time, all manner of bonuses if you wanted to be a family doctor.......

This stuff does seem to come in somewhat of cyclic pattern

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1 hour ago, rmorelan said:

Ha - you know that is what we said about the people before us :) Even lower tuition, still low rates, newspaper screaming we need more doctors now, nobody trying to cut fees on everything every single time, all manner of bonuses if you wanted to be a family doctor.......

This stuff does seem to come in somewhat of cyclic pattern

Geez, I can only imagine what kind of fantasy the generation before them where living in! :P

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10 hours ago, JohnGrisham said:

"Just give penicillin for everything! And bill MSP $$$$"

If my infectious disease tutor is to be believed, isn't it the same thing now but with tazocin instead of penicillin? Haha!

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As expected, the BoC hiked the interest rate by .25% this morning. The overnight rate is now 1.5%. This means the big banks' prime is now going to be 3.7%. Those with the prime less .25% LOCs will see their rate adjusted correspondingly to 3.45%. 

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It is widely expected that there will be another interest rate hike tomorrow - up another .25 p.p. Consequently, LOCs will be going from 3.45% to 3.7%

Additional details

BMO: We are now calling for three rate hikes in 2019 (January, April, and July).

RBC: We expect the Bank of Canada to proceed with further rate hikes that will raise its overnight rate from 1.50% currently to 2.25% in the first half of 2019. This would mean the big banks' prime is going to be about 4.45%. The LOCs will be going at about 4.2% give or take by mid-2019. 

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24 minutes ago, la marzocco said:

It is widely expected that there will be another interest rate hike tomorrow - up another .25 p.p. Consequently, LOCs will be going from 3.45% to 3.7%

Additional details

BMO: We are now calling for three rate hikes in 2019 (January, April, and July).

RBC: We expect the Bank of Canada to proceed with further rate hikes that will raise its overnight rate from 1.50% currently to 2.25% in the first half of 2019. This would mean the big banks' prime is going to be about 4.45%. The LOCs will be going at about 4.2% give or take by mid-2019. 

ha, yeah all that is wonderful for us of course. I will say that predicting that far into the future seems a bit of an overcall but the days of lower interest rate remaining unchanged are seemingly gone. 

It is never all doom and gloom but the overall pressures are seeming to mount. Interest rates are rising, tuition is still increasing to insane levels, and various provinces are relatively dramatically reducing physician fees. 

These things wax and wane but it will be a period of relative pain going forward.  

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21 minutes ago, rmorelan said:

ha, yeah all that is wonderful for us of course. I will say that predicting that far into the future seems a bit of an overcall but the days of lower interest rate remaining unchanged are seemingly gone. 

It is never all doom and gloom but the overall pressures are seeming to mount. Interest rates are rising, tuition is still increasing to insane levels, and various provinces are relatively dramatically reducing physician fees. 

These things wax and wane but it will be a period of relative pain going forward.  

Agreed. However, I see the signing of the usmca as the nail in the coffin and lifted any remaining economic uncertainty that the BoC had. 2.25% overnight rate seems very plausible for mid-2019. Many news reports coming in citing how new homeowners are becoming increasingly worried - locked in a home when rates were low and money was cheap and now this is starting to put more and more pressure.

https://www.ctvnews.ca/business/one-third-of-canadians-fear-bankruptcy-ahead-of-expected-interest-rate-hike-1.4146148

https://globalnews.ca/news/4585337/bank-of-canada-oct-24-interest-rate-hike-debt-delinquencies/

Certainly, there is a sensational element to these articles, but there is still some underlying truth. Our generation has not seen historically high interest rates (my mom was recounting how rates were 15% when she bought her house..), and one of these interest rate hikes may just be the straw that breaks the camel's back given the high leverage of average Canadian. A very rough patch for the next little while, indeed.

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1 minute ago, la marzocco said:

Agreed. However, I see the signing of the usmca as the nail in the coffin and lifted any remaining economic uncertainty that the BoC had. 2.25% overnight rate seems very plausible for mid-2019. Many news reports coming in citing how new homeowners are becoming increasingly worried - locked in a home when rates were low and money was cheap and now this is starting to put more and more pressure.

https://www.ctvnews.ca/business/one-third-of-canadians-fear-bankruptcy-ahead-of-expected-interest-rate-hike-1.4146148

https://globalnews.ca/news/4585337/bank-of-canada-oct-24-interest-rate-hike-debt-delinquencies/

Certainly, there is a sensational element to these articles, but there is still some underlying truth. Our generation has not seen historically high interest rates (my mom was recounting how rates were 15% when she bought her house..), and one of these interest rate hikes may just be the straw that breaks the camel's back given the high leverage of average Canadian.

assuming we don't spiral into a recession at some point - we haven't had one in a long time actually. That is the one "surprise" factor that is hanging out there. They are raising the rates because at present the economy is doing very well. Shifts when they occur are ha as you know not nearly as predictable as they make them out to. At least with rate rising I suppose their well be some flexibility in things. 

 

 

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2 minutes ago, JohnGrisham said:

Sinks harder when you realize half your class doesnt even have a LOC :(

Fair point. I also have a feeling that although mean debt levels are inching up, the distribution is actually getting more polarized - many seem to graduate with little to no debt (familial support, savings, etc.) and many seem to be very debt ridden. Even if you factor in certain differences in lifestyle, it seems to be more dichotomous these days than in the past..

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Well, if you want to try to think about it as a positive, every dollar you put back into the LoC basically saves you a bit more interest...

I was starting to think about investing a bit of money at this point where I am at with my savings, but with the increasing LoC interest rates the strategy is still to put back as much money possible to the LoC. Think of it maybe close to a crappy GIC. 

Kinda sucks when you have expensive exams and other items...

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4 hours ago, distressedpremed said:

Well, if you want to try to think about it as a positive, every dollar you put back into the LoC basically saves you a bit more interest...

I was starting to think about investing a bit of money at this point where I am at with my savings, but with the increasing LoC interest rates the strategy is still to put back as much money possible to the LoC. Think of it maybe close to a crappy GIC. 

Kinda sucks when you have expensive exams and other items...

ha true - I mean once it gets up to about 4 percent - which is going to be at or above it seems very soon, when you consider that you are paying it off as a resident with after tax dollars paying off your loan is about the same as getting a guaranteed return of 6ish percent - which is close to average stock market performance but is again guaranteed. That is pretty good  

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4 hours ago, rmorelan said:

ha true - I mean once it gets up to about 4 percent - which is going to be at or above it seems very soon, when you consider that you are paying it off as a resident with after tax dollars paying off your loan is about the same as getting a guaranteed return of 6ish percent - which is close to average stock market performance but is again guaranteed. That is pretty good  

Ya, the one bright side of all of this will be a reduction in the number of "should I put my LOC into bitcoin and weed stocks" posts.

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1 hour ago, rmorelan said:

ha - yeah.....not recommended.

It is better to pay off LOC first, and then invest as a couch potato afterwards. I personally won't recommend invest with LOC. Live humbly as a resident, and pay off debts as a staff, and then start to save towards retirements.

With the Ontario government cutting down all physicians' salary or cap, we should all be wise in terms of money. It is sad that physicians are so time consumed by our profession, but we have poor literacy when it comes to money management. I am skeptical towards all financial advisors, MD financials when you know they charge 1-2 % MER, and sometimes would invest in riskier funds because they get higher commissions. As said by one of my wise staff physician, one thing you learn in medicine, it is always better to do everything yourself, and do not trust anyone until you have laid eye on a patient". This principle could be applied to financial management as well. :) 

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Even at these interest rates, there are those of us taking out our LOC to invest in the stock market. There's a big correction in the market right now and the interest you pay on a line of credit can be deducted off the top of your income in most cases. The exceptions are if you put the money into RRSP or TFSA.

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