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4 ways to protect yourself when interest rates rise

A lot can happen when interest rates rise. And in 2022, they just keep going up. The benchmark interest rate was recently raised to 2.5% – the biggest leap in over two decades – since interest rates are the Bank of Canada’s main tool to keep inflation at bay.

A rising interest rate environment affects everyone in different ways. It can be good news for those who have a fixed rate mortgage, for instance, but very stressful for those who are renewing their mortgage this year or carrying a variable rate mortgage. Regardless, when interest rates rise, it’s important to make sure you have a solid understanding of your finances and are as prepared as possible for the future.

So, how can you be mindful of rising interest rates while also working toward your financial goals? Here are 4 ways to protect yourself when interest rates rise1


1. Find time for your finances

When was the last time you penciled in some one-on-one time for you and your financial plan? Whether you spend 15 minutes reading through a blog post about rising interest rates, or a few hours revisiting your loans and credit score, getting familiar with your finances will help you feel more prepared and empowered to make decisions that align with your financial goals.

Know that every situation is different and even the small steps count. If you carry a mortgage, for example, make sure you understand the different types of home loans, which one you have, and what a rising interest rate might mean for your mortgage. If you have questions or want tailored advice that fits your finances, book an appointment with your Vancity Account Manager or Renewal Centre Specialist.

2. Take steps to balance your budget

Budgeting isn’t everyone’s favourite pastime, but it also doesn’t have to be exhausting — and it’s a great way to help protect yourself when interest rates rise. Start by calculating your net income and subtracting your mandatory expenses to find out how much money is left over. From there, review your bills to separate your needs from your nice-to-haves. For a budgeting head-start, give our cash flow calculator a try.

Not only will this exercise help prepare you in a time of rising interest rates, but it can also point out areas where you’re overspending and spark ideas for cutting costs. That way, you can dedicate more money to the things that matter most to you, whether it’s dining out, going to a concert, or traveling to see family.

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3. Review any variable rate loans

When interest rates rise, variable rate loans can be hit hard. People typically choose variable rate loans because they offer the lowest interest rates available on the market, but they come with their own set of disadvantages. Depending on your lender, variable rate loans change based on any movement of the ‘prime rate’, or market interest rate. So, when interest rates rise, your variable rate rises too.

Whether you have a variable rate mortgage, HELOC, or line of credit, make sure you understand how rising interest rates will continue to affect your monthly payments. One variable rate loan might not significantly affect your finances, but if you’re carrying a variable rate mortgage and multiple lines of credit, for example, the impact of rising interest rates can quickly add up.

Check out the ‘Payment’ tab in our mortgage calculator to better understand how a rising interest rate might impact your budget. And don’t forget to book an appointment with your Vancity Account Manager or Renewal Centre Specialist for tailored financial advice, whether you need assistance with your accounts or it’s time to renew your mortgage.

4. Set up an emergency fund

If you haven’t already, consider setting up an emergency fund that’s separate from your other savings that you’ll only tap into if the unexpected happens — like a job loss, medical emergency, car mishap, or unplanned travel expenses. Especially if you already carry multiple loans, an emergency fund can help ensure you won’t have to borrow more.

So, how much should you set aside? The answer depends on your financial circumstances. You can start small and work your way up to 6 months’ worth of expenses — but starting is the most important part.

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The same is true of all these ideas for how to protect yourself when interest rates rise: your best course of action is to simply start. Taking stock of your finances, budgeting where you can, or starting an emergency fund can all be small actions — but they can make a significant difference in bringing you closer to your financial goals.

Still have questions or not sure where to start? Our Vancity team is here to help you feel confident in your financial future and access innovative banking solutions that look out for you and our world. Book an appointment with us today.


1The information provided in this post is based on Vancity products.

®MEMBER CARD & Design are registered certification marks owned by Canadian Credit Union Association, used under license.

Want to learn more about the rising interest rate environment and what it means for you? Check out our Instagram Live Q&A with Vancity’s Ryan Mckinley (Sr. Mortgage Development Manager) and Stephanie Larbalestier (Account Manager).

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