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This website is very helpful on how interest and loans can affect you. If the interest rates in Canada were to go up it would has huge affects on anyone who needs a loan and people who already have loans. If you're  borrowing money and the interest rate goes up you will more than likely have to renegotiate a fixed interest rate.

This website is by far the most informative and helpful website i could find on the internet i learned a lot of good information from this website.

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When a rise in interest rates may affect you

A rise in interest rates often means that it will cost you more to borrow money.

A rise in interest rates may affect you if:

you have a mortgage, a line of credit or other loans with variable interest rates

you'll need to renew a fixed interest rate mortgage or loan

Your financial institution could also increase your interest rate if you don't make your payments on time.

How interest rates work

Interest rates rise and fall over time. If you're borrowing money, interest is the amount you pay to your lender to use the money. The lender uses the interest rate to calculate how much you need to pay to borrow money.

Financial institutions set the interest rate for your loan. This could be a mortgage, a line of credit or another type of loan.

You'll find your interest rate in your loan agreement. Your financial institution must also provide you with certain information about interest rates on your loan.

Learn more about your right to information when you borrow money.

Fixed and variable interest rate loans

When you get a loan, your financial institution may offer you a fixed or a variable interest rate.

A fixed interest rate will stay the same for the term of your loan. A variable interest rate may increase or decrease over the term of your loan.

Some lenders may offer you a lower introductory rate for a set period for certain types of loans. Make sure you're still able to afford the payments at the regular higher interest rate.

Dealing with a rise in interest rates

Pay down your debt as much as possible to deal with a rise in interest rates. If you have less debt, you may be able to pay it off more quickly. This may help you avoid the financial stress caused by higher interest rates and bigger loan payments.

You may deal with a rise by using these tips:

reduce expenses so you have more money to pay down your debt

pay down the debt with the highest interest rate first. This may allow you to pay less interest over the term of your loan

consolidate high interest debts, such as credit cards, into a loan with a lower interest rate

avoid getting the maximum mortgage or line of credit that a lender offers you

avoid taking on unnecessary debt with things you want but don't need

avoid borrowing more money as it could limit your ability to save for your goals

find ways to increase your income to help you pay down debt

make sure you have an emergency fund to deal with unexpected expenses. This may help you cover higher loan payments to avoid penalties

Get tips on paying down your debt and making a plan to manage your debt.
Trigger rates and negative amortization

A variable interest rate mortgage with fixed payments may be riskier than you expect. When interest rates rise, more of each payment automatically goes toward interest costs.

You could end up in a situation where none of your payment goes toward paying down the principal. Instead of paying down your mortgage, the total amount you owe on your mortgage will increase. You may have to contribute more capital to avoid problems renewing your mortgage. Acting early is important to prevent the situation from getting worse.

If you have a variable interest rate mortgage with fixed payments, contact your financial institution as soon as possible to discuss your options.

You may have a mortgage or a loan with a variable interest rate and fixed payments. When interest rates rise, you may reach your trigger rate.

Your trigger rate is the interest rate at which your mortgage or loan payment only covers interest costs. When you reach your trigger rate, none of your payment goes toward paying down the principal. This means that your payment doesn't cover the full amount of interest for that period.

When this happens, your bank will generally add the unpaid interest to the balance you owe on your mortgage or loan. This brings you into negative amortization.

In cases of negative amortization, unpaid interest builds up and the total amount you owe will continue to increase. If you don't take action, you'll owe more money than you expected when you agreed to the mortgage or loan.

The best way to find out your trigger rate is to review your mortgage or loan agreement. You may also contact your financial institution. They'll be able to calculate the exact rate for you. They'll also be able to let you know your options if you reach your trigger rate.

If you reach your trigger rate, your financial institution may require you to:

increase your payments

make additional payments to cover the excess interest

change to a fixed rate mortgage or loan

If you're not at the maximum amortization period allowed, your financial institution may offer to extend your amortization. This would avoid having to increase your payments. However, extending your amortization means paying for a longer period and paying more interest in the long run.

When interest rates are on the rise, contact your financial institution as soon as possible. Ask them about your trigger rate and discuss your options.

Impact of a higher interest rate on your loan payments

The following examples show the impacts of an increase in interest rates on your:

mortgage

personal loan

credit card

How a rise in interest rates could affect your monthly mortgage payments

Suppose you have a mortgage of $300,000 with a variable interest rate and a 25-year amortization. Your interest rate is currently 5% and it goes up to 6.5%. Your mortgage payment will go from $1,745 to $2,009. An increase of $264 a month.

Figure 1: Example of monthly payments for a mortgage of $300,000 with an amortization of 25 years at various interest rates

Text version: Figure 1

Interest rate

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

Monthly payment

$1,270

$1,344

$1,420

$1,498

$1,587

$1,660

$1,745

$1,831

$1,919

$2,009

$2,101

Use the Mortgage Calculator to see the impact of an interest rate increase on your mortgage.

How a rise in interest rates could affect your personal loan monthly payments

Suppose you have a personal loan of $10,000 with a variable interest rate and a 2-year term. Your interest rate is 14.99%.

Your loan payment will increase by $24 a month if interest rates rise by 5%. That adds up to $552 more in interest over the 2 years.

Figure 2: Example of monthly payments for a personal loan of $10,000 with a 2-year term at various interest rates

Text version: Figure 2

Interest rate

9.99%

14.99%

19.99%

29.99%

39.99%

Monthly payment

$461

$485

$509

$559

$612

When a rise in interest rates could affect your credit card payments

There are times when fixed interest rates on credit cards could also rise.

For example, you have to make your minimum monthly payments by the due date. If you don't, your financial institution may increase your interest rate. In the case of credit cards, the rate will usually increase by 5%, but the increase may be higher.

Short-term promotional financing or deferred interest offers may be another reason that your fixed interest rate may increase. Make sure you know how long an offer lasts. This way, you'll expect the increase in your minimum monthly payments once it ends.

Banks and other federally regulated financial institutions must notify you before an interest rate increase takes effect.

Learn more about your right to information when getting a credit card.

Reviewing your budget with your new debt payments

If interest rates rise and your debt payments increase, you may need to review and adjust your budget.

If interest rates rise and your debt payments increase, you may need to review and adjust your budget.

To prepare yourself, try the following:

talk to your lenders to find out by how much your payments will increase

look at how the higher payments will impact your budget and your ability to save for your goals

see how you may reduce expenses or earn more money to pay off your debt faster

Use the Budget Planner to create or review your budget.

Make your budget and review it. If you expect challenges in making your payments, be proactive and don't wait to seek help. Contact your financial institution to discuss your options.

They may be able to offer temporary accommodations such as:

making special payment arrangements

allowing you to skip a payment on your loan

mortgage payment deferrals

Learn more about mortgage relief options.
You may also want to talk to a credit counsellor. They may help you explore the different solutions that are available to you.
Learn more about getting help from a credit counsellor.
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interest rates; rise in interest rates; higher interest rates; trigger rate; negative amortization; fixed and variable; debt repayment

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Managing your money when interest rates rise

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How your loan payments increase when interest rates rise by 0.5%, 1%, 2% and 3%. Find out how paying off debt can protect you from financial stress if interest rates rise.

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Every Canadian should read this article. I think reading this will open the eyes of most Canadians it shows that Canada's interest rates for the last 30 years have been going down gradually but in 2017 Canada saw rates spike multiple times after it had only been going down the last 7 years. This article shows how the bank of Canada has been doing a good job at keeping inflation rates low so our economy can continue to grow and thrive.

Reading this article I learned just how important the Bank of Canada's job is they keep our country operating and keeping our economy growing without getting out of hand.

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Advertiser Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.

Interest rates have been low for so long now that some Canadians have forgotten that rates don't only go down - they can go up, too. To put this into perspective, the interest rate on a five-year fixed rate mortgage reached a high of 21% in the second half of 1981. While we're not saying rates will skyrocket that high again, it does show the degree of fluctuation that can occur.

In the last decade interest rates bottomed out in the wake of the financial crisis. Pre-crisis rates were at 4.25% in 2008, before hitting a low of 0.25% in the spring of 2009. That's a 4% drop in a little over a year!

But times have changed, and the Canadian economy is on the mend. With the unemployment rate at a 40-year low and Canada boasting the strongest growth among all the G7 countries, the Bank of Canada has recently felt confident enough to raise interest rates again. We saw multiple rate hikes in 2017, the first time rates increased in about seven years. And we've already seen one rate hike in only the first month of 2018.

And that may not be all for this year, as many economists are predicting further increases in the months to come. So what does this mean for average Canadians like you and me? How does it affect our money? Rising and falling interest rates might seem like high-level finance talk, but it's actually pretty easy to explain.

Why does the Bank of Canada raise interest rates?

The Bank of Canada plays a very important role in the Canadian economy. It's in charge of monetary policy, which is no small burden. The bank's current goal is to keep the inflation rate between one and three percent-a low and stable rate that helps steadily grow our economy and create jobs. An economy that grows too quickly can lead to some of the pain points that many Canadians are experiencing right now: high levels of household debt-currently near a record high-and inflated housing prices-those of you who've recently considered buying a home in the GTA just let out a knowing groan, I'm sure.

By raising rates now, our central bank can not only stabilize housing costs and reduce levels of household debt, but can also better protect us from an economic shock in the future (e.g. if the price of oil and gas plummets again or if there's another global recession). Though those are welcome long-term effects of increased interest rates, the immediate aftermath of the hikes will affect different Canadians in different ways.

In a year of increasing interest rates, your calculator is your friend. See how a 2% increase in rates would affect any of your variable rate debt.

What does an increased interest rate mean for your debts?

It might take you longer to pay off your debt

An increased interest rate by the Bank of Canada will not affect those with fixed rate debts (at least until the terms of said debts come up for renewal). But the rate hike might lead to lenders increasing the prime interest rate that Canadians receive for their loans, which in turn leads to an increase in variable interest rates. Some forms of debt that might have variable rates include:

Mortgages

Lines of credit

Car loans

Student loans

Credit cards (such as the TD Emerald Flex Rate Visa Card)

Basically, when the Bank of Canada increases its interest rate, consumers with variable-rate loans end up paying more each month. Let's say you had a variable (also called an 'adjustable') rate mortgage in the amount of $400,000 amortized over 25 years. If your mortgage rate is 2.35%, then your monthly mortgage payment would be $1,762. But if the prime rate were to go up by just 0.25% (the amount of a typical interest rate hike), your mortgage rate suddenly hikes to 2.60%, and your monthly mortgage payment goes up to $1,812. It may not look like much, but it definitely adds up over time.

You might have tighter monthly cash flow

If your debt payments increase to cover the elevated interest, you'll have less wiggle room in other aspects of your budget. In the aforementioned example, you're paying an extra $50 out of your pocket each and every month over the course of 25 years. That's a cool $15K when all is said and done. And that's from only one interest rate hike! Imagine two or three of them in a single year and you get the picture of what this will cost you.

Rate hikes are particularly tough on marginal borrowers: those who barely qualified for a mortgage or loan and who borrowed at the maximum (or near maximum) interest rate they were approved for. Though I generally support and encourage Canadians who are aggressive in their pursuit of homeownership, the repeat rate hikes we're seeing should make would-be marginal borrowers think twice before signing on the dotted line, as they might now have a tough time refinancing their debt.

How to protect yourself from rising interest rates

The threat of rising interest rates isn't fun if you're carrying debt tied to prime, so here's how to hold on to more of your money in this period:

Prioritize paying down any variable rate debt

If you have both fixed rate debt and variable rate debt (tied to prime), consider making a plan to aggressively pay down your variable rate debt first. By paying down this debt more quickly, you can soften the impact of higher interest rates and pay less over time. *Caveat: if you have substantial fixed debt, such as high-interest credit card debt, it might still make sense to focus on paying that down first, depending on how much fixed rate debt you have and how high the fixed rate is.

Consider converting to fixed rates

If the possibility of ever-increasing interest rates keeps you up at night, and you're currently in the market for a loan, consider choosing loans that are tied to a fixed rather than variable rate. If you already have a variable rate mortgage or home equity line of credit, check with your lender to see if they'll let you convert to the stability of a fixed rate. Just keep in mind that you'll probably get something called the "conversion rate," which will be higher than the fixed rate given to brand new customers of that lender. Take the conversion rate that they offer you, do some number crunching, and compare the amount you'll end up paying with the conversion rate to what you'd pay with your current variable rate. Then factor in the possibility that the Bank of Canada increases interest rates by 0.5% later this year.

Similarly, if you have a variable rate credit card, now might be the time to cancel it and seek out a low-interest fixed-rate card that won't be tied to prime.

Stress test your own finances

In a year of increasing interest rates, your calculator is your friend. See how a 2% increase in rates would affect any of your variable rate debt. Although you're only technically required to do a mortgage stress test when you first qualify for a mortgage, it's still a good exercise to make sure you aren't going to run into any cash flow problems later on if and when higher rates do arrive.

Keep an eye on the news

If the U.S. decides to pull out of NAFTA, the Bank of Canada could put the brakes on any further plans for rate hikes until talks resume. Some of what 'the Donald' says may just be hot air, but if he does follow through, those with debt tied to prime will be able to rest a little easier.

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Bank of Canada Interest Rates Increase: How Does It Affect You? | Greedyrates.ca

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Advertiser Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services. Interest rates have been low for so long now that some Canadians have forgotten that rates don't only go down - they can go up, too.

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This website is very useful and had great points. It describes the role of the Bank of Canada very well it shows the difference between the Bank of Canada and other banks. This website shows how even a slight increase in interest rates can affect you as a consumer and all the areas it will affect, also giving you tips on how you can protect yourself.

I found this website very informative everything is lay'ed out in simple categories making it easy to follow and understand.

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Interest Rate Announcements by the Bank of Canada, 8 Things to Know | My Money Coach

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Most people tune out news about interest rate announcements by the Bank of Canada. Not sure why you should care? We explain the basics to make it easy to understand. Bottom line - a single 0.25% increase won't matter too much now, but more changes can affect your financial stability and well-being.

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This website is great for anyone who is new with finances and interest rates or someone who just wants to know more. In this website is describes to you how interest rates can change overnight things like loans and mortgages will feel the impact of overnight hikes depending on if there variable of fixed how also it shows how the Bank of Canada's role and influence on interest in Canada works.

This website is great for anyone who is feeling left out of how interest rate work in Canada and the thinks they could affect in your daily life.

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Have a mortgage, credit card, or investments? The Bank of Canada overnight rate affects you.

Managing your money can be tricky. Between salary disruptions, creating an emergency fund, and making mortgage payments, staying in the black every month can be a challenge - particularly if you're just starting out and in a lower pay grid. That's why it's important for education members to understand the Bank of Canada (BoC), how it works, and how changing its overnight rate could affect you, your money, and your plans.

Since July 12 th, the headlines have been all over the newspapers and online. Unfortunately, if you're like most consumers, you have only a vaguest idea of what those headlines really mean - that it probably will mean paying more interest on your mortgage. But here's another newsflash: ANYONE who has a credit card, a line of credit or mortgage, who's shopping for a new home or investing is affected when the BoC makes a change, such as the recent increase in the overnight rate from .50% to .75%.

How - and why - does the BoC influence interest rates?

Ok, here's "BoC 101". The BoC is the country's central bank, and its role is to promote the economic and financial welfare of Canada. One of its financial responsibilities is monetary policy. The goal of monetary policy is to "contribute to solid economic performance and rising living standards for Canadians by keeping inflation low, stable, and predictable". The BoC implements monetary policy by raising or lowering the target for the overnight rate, which is the interest rate at which major financial institutions borrow and lend one-day (or overnight) funds among themselves. All this can be found on their website.

Changes in the target overnight interest rate lead to changes in other market interest rates and therefore to changes in the demand for credit, the demand for money, and the demand for bank notes.

Did you know? "Inflation targeting" and why the BoC uses it.
Until the 1930's, the objective of most countries' central banks was to protect the country's exchange rate. As inflation rates dropped, the central bank would become more restrictive about cash flow. Unfortunately, the result was the Great Depression, so this approach was, understandably, changed. For a time, central banks monitored and controlled employment numbers. By the 1990s central banks across the world started to adopt inflation rates as the primary target. Most central banks today focus on the control of inflation, believing that:

1. High inflation is costly for individuals and damaging to the economy.

2. Inflation is the only macroeconomic variable over which central banks have a systematic and sustained influence.

The conventional wisdom is that raising interest rates usually cools the economy to rein in inflation; lowering interest rates usually accelerates the economy, thereby boosting inflation.
The BoC considers a 2% inflation rate to be the ideal.

Inflation targets in developed economies are usually set at 1% to 3% per year. Targeting an inflation rate that is too low or too high could create problems. An inflation target that is too low might lead to higher unemployment, restrict the central bank's ability to support a recovery in times of recession, and increase the chances or frequency of deflation rather than inflation. Of course, no one wants to have an inflation target that is too high either, as inflation costs can be considerable.

Beginning in 1992, the BoC's target range for inflation was 3-5 per-cent. This fell to 2-4 percent by 1993 and to 1-3 percent by the end of 1995. When the 2% goal was reached, it was judged to successfully deliver good overall economic performance. The BoC has examined the 2% target carefully over the years and considers the case for both a lower and a higher inflation target.

Have a mortgage? You're going to pay more.

If you have a mortgage, how much - and when -you'll feel the impact of the rate increase will depend on whether your mortgage is variable or fixed rate.

If you have a variable rate mortgage, the amount of interest you're charged is tied to the overnight rate. Financial institutions pass on any increase in the rate to consumers almost immediately.

If you have a fixed rate mortgage, nothing will change until the fixed term ends and it's time to renew. That's because your rate is tied to the yield, or interest rate, of bonds. (It works like this: If the five-year Government of Canada bond is at 0.5%, the banks would take this rate and add percentage points to cover their costs and make some profit. If they add another 3.5% to that bond rate, their prime lending rate would be 4%. ...which might be discounted in competitive markets for ideal borrowers.)

Will you pay more interest on debt?

Quick - is the interest on your credit card at a fixed rate, or is it variable? What about your line of credit? Your car loan? Do you know?

Some types of credit, such as credit cards, charge interest at a fixed rate, so their rate of interest would not increase with the BoC's overnight rate. "Clients who are being charged a fixed rate on their credit card should still take action, though", says Darryl Martella, Educators Financial Group Financial Advisor. "The rate of interest on some credit cards is so high, it's one of the first places to evaluate when looking to save money."

Have a line of credit (LOC)? Like a variable rate mortgage, is linked to the prime rate, and your rate of interest will rise. This is true whether your LOC is secured or unsecured.

This discussion has a punchline, though, which is this: the actual additional interest you'll pay as a result in the BoC overnight rate increase is NOT the point. The point is that you ALWAYS need to be aware of how much interest you are paying on your debt, how to minimize that amount, and how it impacts your budget and financial saving goals. Talk to your Educators financial advisor about how you can minimize the interest you pay on the debt your owe.

Historically, an overnight interest rate increase has not affected housing costs, much.

Will the increase in the BoC overnight rate and subsequent increase in variable mortgage interest rates affect property prices? Let's look at the history. In June 2010, the interest rate rose by .25%, followed by another hike to 0.75 per cent a month later and to 1 per cent in September, where it stayed for a few years. Data from the Toronto Real Estate Board and the Real Estate Board of Greater Vancouver show that property prices stalled for several months after the increases, after which the general upward trend continued in both cities.

Today, though, interest rate increases are not the only factor affecting the GTA housing market. The provincial foreign buyer's tax, combined with stricter requirements to secure a mortgage have already resulted in GTA property prices cooling (the average price in June was $793,915, compared to $920,791 in April). Will the increase in mortgage interest rates add to the cooling effect? It's a 'wait and see'.

The education members most likely to be affected will be those buying their first home. When you're saving for a down payment, and perhaps paying off a student loan, every penny counts. Maximize your savings and know exactly what you can afford by talking to an Educators financial advisor.

The .25% interest rate increase is not enough to make a big difference to savers.

Unfortunately, an increase in the overnight rate does not necessarily mean a corresponding increase in interest earned in a regular savings account. A high interest savings account (HISA) and a Tax Free Savings Account ((TFSA) - both of which you can get at Educators Financial Group - are still probably better savings options.

And if you're thinking that returns on Guaranteed Investment Certificates (GICs) will rise, consider this: although banks increase the interest rate on mortgages quickly, the unfortunate fact is that the interest paid on a GIC is unlikely to increase as quickly. Some financial gurus actually disparage GICs as lagging behind the inflation rate.

Interest rate increase means bonds and stock valuations may be lowered.

Low interest rates have helped support fixed income (bonds) and stock returns over the past few years.

This may change. Rising interest rates drive bond prices down, and falling rates drive them up. Darryl Martella, Educators Financial Group Financial Advisor, explains why: "On the day a bondholder decides to sell his or her bond, current market rates determine the price. The bondholder will sell for less when interest rates are higher than the bond's rate, and for more when interest rates are lower. Usually, the more years the bond is from maturity (the date of repayment), the bigger the price change."

When it comes to stocks, the monetary policy over the past 8+ years has made them attractive. When the option is very low rates on GICs and bonds, investors tend to put more money into the stock market. In fact, many investors earned higher levels of income by buying dividend-paying stocks than they could on bonds and they had the opportunity for capital appreciation. As a result, stock prices continued to climb from their lows in 2009, with the exception of a few corrections along the way, and stock valuations are presently at much higher than historical levels.

Changes in interest rates can significantly affect stock prices, which may decline as companies pay more for loans and materials, causing lower profits.

Despite changes like the BoC overnight rate, your portfolio should be structured so that it continues to be on track to meet your financial goals while reflecting your tolerance for risk. You and your Educators Financial Advisor should discuss your portfolio on a regular basis, or whenever there are changes to your personal circumstances.

Have questions? Get one of our accredited Agent - Regional Directors to contact you.
http://www.pearsoned.ca/highered/showcase/ragan/pdf/9780321685537_ch29.pdf http://www.frbsf.org/education/publications/doctor-econ/2007/march/inflation-targeting-monetary-policy-costs-benefits/ http://www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/ http://www.moneysense.ca/spend/real-estate/mortgages/do-bank-of-canada-rates-impact-you-10-questions-answered/ http://www.cbc.ca/news/business/still-a-borrower-s-world-what-this-week-s-rate-hike-means-for-your-finances-1.4204180 ** http://www.shannondeckers.com/will-bank-canadas-interest-rate-hike-affect-real-estate-prices/ *** http://www.tridelta.ca/articles/

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It pays to understand the Bank of Canada overnight rate increase. - Educators Financial

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Managing your money can be tricky. Between salary disruptions, creating an emergency fund, and making mortgage payments, staying in the black every month can be a challenge - particularly if you're just starting out and in a lower pay grid. That's why it's important for education members to understand the Bank of Canada (BoC), how ...

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This video shows just how much interest rates and loans affect the consumers and tax payer's on a daily basis. Toronto for example had 26% of mortgages being 80% loan to value ratio being the highest in Canada. Canadians are just biting the bullet and paying with the high interest rates but this can only go on for so long before it will crash.

This video is extremely informative about the nature of the economy in Canada right now and wants to ensure Canadian's are protected and secure in there country.

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Interest rates: The consumer impact and household debt

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This video explains very clearly how the slow increase in interest rates in Canada have affect home owners and consumers leading to huge amounts of debt in Canadian's and no one being able to pay it off. Since the 1980's the amount of money Canadian's owe per dollar they earn has more that doubled, in 1980 for every dollar earned in Canada 66 cents was owed in 2019 for every dollar earned a 1.71$ is owed.

This video is very good to watch you can learn a lot about how Canada's interest rates are rising and how Canadian's are more in debt than ever before.

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Many Canadians using their homes as ATM's

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This video does a very good job at showing you just how the interest rates change and what it will affect in your life as a daily consumer, this informs you on how the Bank of Canada comes to there decisions on interest rates and shows you why the rates increase/decrease.

I found this video very straight forward and informative getting directly to the points that matter is a short well prepared breakdown of the Bank of Canada and interest rates.

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BREAKDOWN: Bank of Canada Hikes Interest Rate

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This video is great to show consumers how interest rates in Canada are affecting new home buyers and how with the new rules in Canada when it comes to buying a home, consumers will need to be able to afford a home that is much more than the one the bank will let them buy.

In this video i learned that it is very difficult for new home buyers in Canada to get into the housing market with the rules that now require you to be able to afford a home at higher interest rates than what is offered by your local bank.

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Would you pass the new mortgage stress test?

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This image shows that even a small increase in interest like .5% can have a huge affect on things like loans and mortgages

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This image is a good diagram of what would happen if interest rate were to rise and what those problems would lead to.