News Releases

TORONTO, ONTARIO--(Marketwire - July 22, 2011) - While holding the line on interest rates earlier this week, the Bank of Canada has signalled that rates could begin to climb later this year.

According to BMO Economics, interest rates are likely to increase in October and again in December, before pausing next summer. This will leave the Bank of Canada's benchmark rate at 2.5 per cent by the end of 2012, meaning Canadians would benefit from looking for ways to reduce debt before rates go up. The latest numbers show consumers have started to do that, with Canadians' debt growth slowing.

Ahead of the possible increases, BMO Bank of Montreal issued the top five ways to reduce debt:

• Curb credit card debt – Pay down credit cards, beginning with those that carry the highest rate and consider using a low rate card for purchases. For instance, the BMO Preferred Rate MasterCard offers a low rate of 11.9 per cent for an annual fee of $20 per year.

• Make eliminating high interest debt a priority – Consolidate your debt load by using a line of credit with a lower interest rate to pay off debts with higher interest rates.

• Become mortgage free faster – Cutting your amortization from 30 to 25 years and increasing monthly payments on mortgages can help you pay down your mortgage faster while saving you thousands of dollars in interest costs. For instance, BMO offers a low 5 year-fixed rate mortgage with a maximum 25-year amortization at 3.79 per cent. Additionally, consider increasing the frequency of your payments and/or making lump sum payments to pay down your mortgage faster. For example, by making a lump sum payment of 5 per cent of the original principal each year, you can pay off a 25 year mortgage in less than 12 years and save over $136,000 in interest.

• Prioritize wants versus needs – Curb unnecessary spending by avoiding impulse purchases. Make a list of essentials and do price comparisons to ensure you don't spend outside of your budget. Cutting $20 per week from your current spending habits could you save you over $1000 per year, which can be put towards your retirement.

• Create a budget and stick to it – Develop a budget that establishes how household expenses will be paid and how money will be managed. Take advantage of free online tools, such as BMO MoneyLogic™, to help stay on top of everyday household spending and saving. Users can set budget limits and receive notifications when limits have been reached to avoid over spending. For instance, a $300 limit can be assigned to 'monthly entertainment,' and you'll receive a notification when you login to BMO MoneyLogic if the amount is exceeded.

For more information, please visit www.bmo.com/smartsteps.

Internet Address: www.bmo.com