In the first quarter of this year we saw interest rates drop to a record low. This was followed in the second quarter with an even further decline. We can only guess where it will end, but we feel the really low interest rate environment may be coming to an end.

The North American governments used interest rates to stimulate the economy after the tragic events of September 11, 2001. The policy makers seem to have been successful. Consumers have gone on a spending spree, buying houses, cars and other consumer goods. Much of this buying has occurred with borrowed money. As this economic activity works its way through the system, the governments will not want to over stimulate the economy. The next stage will be for interest rates to begin to move in an upward direction.

All this to say, that there is opportunity for those of us who have older loans and mortgages. Now might be the perfect time to renegotiate those higher rates of a few years ago with the lower rates of today. You will have to weigh the benefits of paying a possible penalty to your lender if you break the terms of your mortgage agreement. Some lenders may be flexible with the penalty if your mortgage is up for renewal in the near future.

There should not be a penalty to renegotiate a term loan. Another option is to ask your lender for a variable rate line of credit. Preferably one that charges interest at, or close to prime. With this type of credit, and a little discipline, you can save interest cost all the time, and you may never have to apply for another loan.

Some experts say that interest rates may continue to be low into the foreseeable future. We are not suggesting that we will see double digit interest rates in the near term, but we do expect rates to rise somewhat. If you too are of the same opinion, take advantage of these low rates and consolidate or renegotiate your old loans. The work may save you a bundle.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.