Borrowing against your home equity to invest was the savviest move in personal finance until recently. Stocks were flying, and so was the housing market. Plus, you could borrow at rates that seemed trivial in comparison to projected rates of return.
The mindset that home equity must be exploited to generate economic gain persists, even as rising rates jack up the cost of carrying a home equity line of credit. A reader recently enquired about the $700,000 he has in his home. “Should I be using that equity to invest or for another purpose, such as purchasing another property?” he asks.
Answer: No, not now.
The Bank of Canada increased its overnight rate by one percentage point on Wednesday, a move that will be passed along in full to floating-rate debt like credit lines. The total increase in the overnight rate this year by the central bank amounts to 2.25 points, and more rate hikes…